‘Reforms have generally survived the test of politics’: Nomura says India’s economic fundamentals will remain robust

Lok Sabha election 2024 results: Investment bank Nomura has said that India’s economic fundamentals will remain robust, and that reforms in the country have generally survived the test of politics. The statements come a day after the BJP-led NDA was elected to power but with a weaker than anticipated mandate. Meanwhile, the opposition INDIA bloc has performed better than what the exit polls predicted. 

"Our assessment is that India's economic fundamentals remain robust. Reforms in India have generally survived the test of politics and we expect the government to continue the pace of governance and administrative reforms, leaving states to work around the more intractable reforms around land and labour," Nomura said.

It added that near-term uncertainty is high and the political backdrop is slightly different, but the broader direction of reforms, macros and the economy will remain unchanged. 

Nomura underscored that the immediate focus would be on the formation of the government, and parleys between political allies and parties. They have said that the Cabinet could introduce some fresh faces, and that Nomura’s focus would remain on the Budget, which is likely in early July, to assess the policy direction. 

Nomura expects the first 125-day agenda of the new government to focus on digitalisation, infrastructure, industrialisation and governance-related reforms. The election outcome could result in some reorientation of spending towards revex from capex, it said, while they do not foresee a dismissal of macro prudence.

"We do not expect any slip of the interim budget target of 5.1 per cent of GDP but, if the government deems reflationary policies as a political necessity, then that could mean slower consolidation," it said, adding that supply-side reforms are likely to continue while factor market reforms will remain difficult. It is not expecting a material impact on monetary policy, it said.

The swearing-in ceremony of the government is likely to be on June 9. The final tally showed NDA winning 292 seats, and INDIA bloc winning 234 seats, while 17 went to ‘others’.