The election outcome poses near-term uncertainty but is unlikely to alter the economy’s path, according to DBS Research.

“With much of the recent emphasis on supply driven reforms, authorities might explore introducing consumption driven stimulus and directed support for the agricultural sector, but a complete shift towards competitive populism is not our base case. Changes that required deeper constitutional changes, which were not particularly growth-accretive, remain out of scope,” said Radhika Rao, Senior Economist, DBS Group Research.

 One of the immediate priorities will be the upcoming Budget, likely in second half of the month. This is set against the backdrop of strong tax and nontax revenues in FY24 besides firm growth, which helped the government to even better the revised estimate of the deficit by 20bp to -5.6 per cent of GDP vs revised -5.8 per cent.

“We retain our real GDP growth forecast for FY25. The July budget will seek to provide a more inclusive growth. The RBI monetary policy committee is on course to keep rates on hold on Friday,” Rao said.

Laying the ground for inclusive growth and expansion of manufacturing presence are likely to be the theme for the incoming government. Progress on tackling other key issues might be harder to implement in the near-term, concerning the key factors of production namely labour reforms (codification of labour laws, flexibility in hiring & firing, etc.), and land (easing the acquisition process alongside environmental clearances), DBS said.

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