Why 2024 will be a game changer for India's economic, political landscape

The most significant event that will impact the economic growth trajectory of India in 2024 is the General Election scheduled for April-May this year. Prime Minister Narendra Modi is confident of a third consecutive victory. But Opposition parties are mostly likely to go for the kill this time. Majority of opposition parties came together under I.N.D.I.A to defeat BJP. However, India will continue to grow in the long run irrespective of what happens in the elections

We all entered the New Year 2024 today. Different people welcome a New Year in different ways. Some do it silently. Some stare at their sufferings as the New Year kicks in. Such people obviously hope for better tidings and better life in the following 12 months. Some celebrate the occasion in a grand way and with a lot of noise. Of course, some do that in a small way. But nearly half of the people in the world are likely to remain unhappy as they step into the New Year.

As per the poverty line of living on $6.85 (Rs570) per day set by the World Bank for upper-middle-income countries (UMICs), almost 47 per cent of the world’s population lived below this line in 2022.

This situation may have changed in 2023. But as income plays a key role in one’s happiness, many people are unlikely to welcome the New Year with a smile.

Nevertheless, what is in store for India in 2024 when it comes to its economic and political landscape?

On the economic front, global agencies say India will clock a robust growth and is more likely to retain the world’s fastest growing major economy tag. The global rating agency Fitch sees a GDP upswing of 6.5 per cent for India in FY25.

For the uninitiated, the financial year 2024-25 (FY25) will make up three quarters of 2024 as it begins on April 1 next year. The FY25 GDP growth is a tad lower than that of FY24 as forecast at 6.9 per cent by Fitch. Still, India will be ahead in the economic growth race. IMF pegged the FY25 GDP growth at 6.3 per cent, the same as for the current fiscal. Although Nomura, a Japanese agency, has estimated lower than six per cent GDP growth for India, most predictions as regards FY25 are at or above six per cent, while the Reserve Bank of India (RBI) also sees 6.5 per cent growth. The Indian economy grew at 7.7 per cent in April-September 2023.

Despite robust growth forecasts, the Indian economy will have its own challenges in 2024. As is evident in the economic growth data for July-September 2023 quarter, the rural economy is going through a sluggish phase. In addition to that, inflation is ruling high. More so is the food inflation. A higher food inflation trajectory hits the poor more. RBI stated that retail inflation would be around 5.3 per cent in the current fiscal. Compared to that, food inflation is on a far higher side, which was 8.7 per cent in November. And there are no immediate signs of this number coming down. Unless inflation cools down, RBI can’t go for an interest rate cut to fuel growth. Striking an opt balance between spurring growth and containing inflationary pressures is going to be a big challenge in 2024 for RBI.

However, the most significant event that will impact the economic growth trajectory of India in 2024 is the General Elections, scheduled for April-May this year.

Prime Minister Narendra Modi and his party BJP are confident of winning elections this time too. A few months back, BJP’s top brass, including Amit Shah, the Home Minister, claimed that the saffron party would win over 300 Lok Sabha seats. It won 303 seats in 2019. With emphatic wins in the three key northern States of Madhya Pradesh, Rajasthan and Chhattisgarh, the saffron party seems to have changed this narrative and raised the bar for a higher number. There is now a talk of targeting more than 400 seats.

The saffron party may now set ‘Mission 400+’ goal in 2024. If that happens, it will achieve two key milestones. The first milestone will be the third consecutive victory for BJP, and Modi as Prime Minister. That way, Modi will equal the record set by Pandit Jawaharlal Nehru. And BJP will become the second party to notch up this record after Congress achieved it under Nehru’s leadership. BJP will cross the second key milestone if it wins more than 404 MPs. Congress won a record 404 Lok Sabha MPs in 1984 under the leadership of Rajiv Gandhi who became the Prime Minister after the assassination of his mother Indira Gandhi. These elections came after her untimely death and Congress swept the polls, riding on the sympathy wave. Congress added 10 more seats a year later, taking its tally to 414. So, ‘Mission 400+’ will be a very big target that BJP will set for itself.

However, going by the recent Assembly polls, BJP has an upper hand as of now. But there is more time to go before the country heads to the elections. Moreover, elections in India are known to throw up surprises. Furthermore, opposition parties are mostly likely to go for the kill this time.

As many as 28 political parties came together under I.N.D.I.A (Indian National Developmental Inclusive Alliance). They will try to field a common candidate against BJP in many places across India. The I.N.D.I.A bloc may also focus more on welfare measures. Congress leader Rahul Gandhi is also more confident now. His political stature has gone up after the success of Bharat Jodo Yatra. He is getting ready for another yatra from the North East to west. So, the 2024 elections are not going to be an easy task for BJP.

But Modi has already guaranteed that he would take the Indian economy to the coveted third slot in the world after the US and China during his third term. So, he will speed up steps in that direction if he wins.

From the economy point of view, a regime change will obviously bring in a temporary blip because the new incumbent will need time to settle down and set its own path for the country.

The Indian stock markets raced ahead in 2023 factoring in Modi’s third-term as a foregone conclusion. Stock market investors saw their riches grow by a whopping Rs82 lakh crore in 2023. An election surprise will be a real big event for the bourses.

However, India will continue to grow in the long run, irrespective of what happens in the elections. This is so because its macroeconomic fundamentals are strong now and a significant part of our economy is driven by domestic consumption. Of course, there may be variations in the pace and rate of growth.

Anyway, the New Year 2024 will be a game changer for India’s political and economic landscape. That’s for sure.

I Wish You All A Happy and an Eventful New Year 2024. Let’s hope more people welcome the year 2025 with a smile when it arrives.