Narendra Modi is facing his one of his biggest challenges yet as India’s prime minister, with exit polls suggesting a tighter-than-expected contest in five state elections in results that will come out Tuesday immediately after his central bank governor resigned unexpectedly.
Both developments have thrown Indian financial markets into turmoil, threatening his ruling party’s momentum as he seeks re-election in the next six months. The rupee slumped 1.6 per cent in early trading in Mumbai, while yields on 10-year sovereign bonds jumped 12 basis points to 7.71 per cent. The S&P BSE Sensex gauge of stocks declined 1.1 per cent in pre-market trading.
Six major exit polls released Friday showed that Modi’s ruling Bharatiya Janata Party could potentially lose ground to the rival Congress Party in the key Indian provinces of Madhya Pradesh and Chhattisgarh -- both of which the BJP has ruled for three straight terms. At least four exit polls also predicted the Congress will oust the BJP in Rajasthan, the country’s largest state.
A poor showing for the BJP when results are announced on Tuesday could make Modi look weaker, more vulnerable and reliant on regional parties to retain power in the 2019 federal poll. Opposition victories in these states could boost the Congress Party’s momentum and help it to exploit the disenchantment over unemployment and rising social tensions.
“Given the anticipated state election results, Modi will probably have to rely more on, and be more constrained by, a coalition in his second term,” said Eurasia Group senior analyst Sasha Riser-Kositsky, who said he still predicts Modi will get re-elected in 2019.
Today’s Chanakya, which predicted Modi’s landslide win in the 2014 general elections, expects Congress to win in the three main states: Madhya Pradesh, Chhattisgarh and Rajasthan.
Since seizing power in 2014 federal polls, Modi’s party has gone on to win numerous regional victories, bringing the total number of Indian states under its control to 19 out of 29.
Any surprise Congress victories would be a significant morale booster for the main opposition party, which has struggled to raise funds and build an alternative narrative since its worst-ever defeat in 2014. That would help it win over allies and convince them to form a united opposition front to defeat Modi next year.
In May, the BJP effectively won the southern state of Karnataka’s regional polls but failed to prove its majority after Congress teamed up with a local party to seize power. On Monday, opposition parties, including Congress leaders, met in New Delhi to discuss plans to take on the ruling party and Modi in the 2019 polls.
“The BJP is going to lose all three states where they’re in power,” said Nilanjan Mukhopadhyay, a political analyst who has authored a Modi biography. Particularly in Madhya Pradesh, he added, people “have tended to underestimate the anger there against the state and the center.”
Two other states are voting as well -- tiny Mizoram in India’s remote northeast and the newly-created state of Telangana, which is likely to re-elect a regional party -- but they are aren’t likely to factor much in the broader contest.