Indian stock market punishes PM Modi
India’s stock market took its biggest tumble in four years after Indian Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) lost its parliamentary majority in the the recent election.
The Indian market has been on a tear since Modi came to power in 2014. The metrics are telling:
On Modi’s watch, the NSE Nifty 50 index has almost tripled in value.
Earlier this year, India’s stock market capitalisation topped US$4.3 trillion to overtake Hong Kong as the world’s fourth-largest market.
Gross domestic product (GDP) grew by 8.2 per cent in the fiscal year ending in April, far outpacing most developing and developed economies alike.
Over the last decade, the GDP per capita has risen from about US$5,000 to more than $7,500. During that time, India has gone from being the ninthlargest economy in the world to the fifth-largest.
On June 4, as the impact of the shock election outcome became clear, the NSE Nifty 50 (NSEI) sank 5.9 per cent and the S&P BSE Sensex tumbled 5.7 per cent — their steepest declines on an election outcome day since 2004.
Modi has run an unabashed probusiness economy. Massive investments have directed to infrastructure. Foreign investors have been lured and red tape cut.
But poverty is widespread. There is growing inequality and pervasive corruption and a shortage of quality jobs to match the needs of its huge population.
In a report released earlier this year, the International Labour Organisation warned of a “mismatch” between the aspirations of India’s educated youth and available jobs.
Longer-term India’s economy is poised to keep growing — the upshot of favourable population demographics and the extended geopolitical tensions between China and US.
The stock market tumble has led the Congress Party’s Rahul Gandhi to demand an investigation. Gandhi has accused top Bharatiya Janata Party (BJP) leaders of making misleading predictions about stock prices surging after June 4.
He claimed that Modi had encouraged people to buy stocks in advance of the election result causing therm to lose money when prices crashed. The BJP has denied the allegations. But Gandhi has demanded a Joint Parliamentary Committee (JPC) investigate the alleged scam and the role of Modi’s enior ministers.
Former Home Minister Amit Shah, told NDTV news channel in an interview: “Stock market crashes should not be linked with elections, but even if such a rumour has been spread, I suggest that you buy (shares) before 4 June. It will shoot up.”
Gandhi has labelled it “the biggest scam” in India’s stock market history, alleging that the manipulation benefited certain “dubious foreign investors”, causing Indians to lose trillions of rupees.
Modi’s departing trade minister, Piyush Goyal, has refuted the allegaations, accusing Gandhi of misleading investors.
Exit polls had predicted the BJP would comfortably win a majority — securing more than 272 seats in the 543 member parliament — while together with its alliance partners, this figure would touch 360-370.