Plain Facts Friday: Coalition era, economic trends, and market reactions

Every Friday, Plain Facts offers data-driven insights with charts, exploring key stories like elections, markets, economy, and more.

Every Friday, Plain Facts publishes a compilation of data-brd insights, complete with easy-to-read charts, to help you delve deeper into the stories reported by Mint in the week gone by. The results of the 2024 Lok Sabha election have brought back the era of coalition governments as the ruling Bharatiya Janata Party (BJP) suffered losses and couldn’t win a majority by itself. India’s manufacturing and services activity remained strong despite slowing down in May.

Election upset

In what was a surprise for India and the world, the incumbent BJP fell short of the majority mark in the 2024 general election as the Opposition. The BJP won 240 seats as opposed to 303 seats in 2019. Although the BJP is expected to form the government with the help of its allies in National Democratic Alliance (NDA), the decline in number of seats and vote share signal the waning popularity of Narendra Modi.

Sensex seesaw

The BJP was confident of expanding its mandate in the Lok Sabha polls, and when all major exit polls predicted a tally of 350-400 seats for its alliance, the Sensex jumped 3.4%, or 2,500 points, on Monday. However, the surprise result, with the BJP falling short of majority, caused a bloodbath on Tuesday as the benchmark index fell 5.7%, or nearly 4,400 points, wiping out nearly ₹30 trillion in investors’ money but only to correct the next day by 3.2%.

Inbound funds

$11.77 billion: That’s the foreign direct investment (FDI) India received from Singapore in 2023-24, the largest from any country, even as overall capital inflows shrank by about 3.5% due to global economic uncertainty, PTI reported, citing government data. FDI from Singapore, too, dipped by 31.6%. FDI equity inflows decreased from major countries last year, including Mauritius, Singapore, the US, and the UK.

GDP blitz

The Indian economy grew 7.8% in the quarter ended March, convincingly going past analysts’ estimates of 7%, according to data released last Friday. However, this was in part driven by a decline in the government’s subsidy expenses. Gross value added (GVA)—a measure of actual value addition in the economy, which excludes the impact of taxes and subsidies—grew just 6.3%. The Centre’s expenditure on subsidies declined 23.8% year-on-year in 2023-24, which could have led to the gap. The gap narrowed in comparison with Q3, but still remains. Meanwhile, in the full year, GDP grew 8.2%.

Hawk mode

The Reserve Bank of India’s (RBI’s) monetary policy committee is set to announce its next policy review on Friday. Against the backdrop of GDP growth holding up despite a global slowdown, the RBI is expected to be more hawkish as its main mandate—bringing inflation close to the 4% mark—is still work in progress, with several uncertainties causing upside risks. In the previous meeting, all but one member of the monetary policy committee voted to keep the policy repo rate unchanged, with a hawkish commentary. It is likely to be the case again given the growth-inflation dynamics.

Comeback trail

45%: That’s the increase in pre-tax profit for Adani Group companies in 2023-24, as earnings before interest, taxes, depreciation and amortization (Ebitda) increased to ₹82,917 crore during the year. This came after the group’s market value crashed in early 2023 following the findings of a damning report from a US short seller. The company focused on containing debt, reducing founder share pledge and consolidating the business in core competencies in FY24, PTI reported.

Robust activity

India’s manufacturing and services purchasing managers’ index (PMI) slowed to 57.5 and 60.2, respectively, in May. However, the numbers still underline a strong pace of growth as they are far above the 50-mark that separates expansion from contraction. While business activity is robust, cost pressures are rising, reflecting a trend of correction in the commodities market. The strong rise in PMI (55 or above) has been a constant phenomenon at least since September 2022, even though GDP data has seen services and manufacturing growth weakening in some quarters.

Chart of the week: Losing face

Exit pollsters failed spectacularly in their predictions of the results of the Lok Sabha election. Most agencies predicted that the National Democratic Alliance would earn a comfortable victory and increase its majority since 2019. But the reverse happened, and the alliance lost over 50 seats as the Opposition bloc put up a brave fight.

Written by Tanay Sukumar and Pragya Srivastava

The article was originally published on Live Mint news website. Views are personal and do not represent the stand of this publication