Brexit may turn out to be a boon in disguise for the Modi government and its game plan for next year’s state elections in UP and Punjab, if crude oil prices fall and investors don’t shun the rupee giv
Brexit may turn out to be a boon in disguise for the Modi government and its game plan for next year’s state elections in UP and Punjab, if crude oil prices fall and investors don’t shun the rupee given India’s strong economic fundamentals and commitment towards reforms.
“Every event has positive and negative aspects. If commodity prices crash, it could benefit India as we are a net importer of crude oil. It could also help bring down inflation and help in trade balance and current account deficit,” Sunil Kumar Sinha, Principal Economist, India Ratings and Research, said. He said on the negative side, remittance from the Middle East into India could be impacted and if FIIs leave there could be other consequences.
However, the government is working to minimize the negative impact on FIIs as it opened more sectors to FDI this week; it is moving to get the GST Bill passed and is trying to sell India’s growth story to foreign investors. Finance Minister, Arun Jaitley is already in China to woo their deep pocket-investors to invest in India. Chinese giant Alibaba has made investments in Indian start-ups like Paytm and Snapdeal and is looking to invest in other companies.
“Brexit vote is today. We are closely tracking developments in UK. India (is) well prepared,” said Economic Affairs Secretary, Shaktikanta Das.
The BJP refused to officially comment on Brexit and maintained that it is an internal issue of another sovereign nation.
Low inflation will put pressure on RBI to cut interest rates. Low inflation, followed by low interest rates is crucial as Prime Minister Narendra Modi is less than a year away from assembly elections in the states of Uttar Pradesh, Punjab, Himachal Pradesh and Uttarakhand. Inflation and price rise are issues which always dominate elections.
The Modi government is already in the process of announcing measures for the neo-middle class, a constituency whose growing aspirations brought it to majority at the Centre. It will hope that low inflation, boost in economic activity through lower interest rates, ease of doing business and measures for neo-middle class will generate enough positive winds by next year for the Centre.
A strong foot-hold in UP, which has the largest number of assembly constituencies and is represented by the Prime Minister himself, could play a crucial role for the BJP in the next general elections scheduled for 2019.
