India Sets General Election Date as Political Tide Shifts

March 7, 2014 Posted by India Briefing Reading Time: 8 minutes

India’s electorate may choose to break its historical tendency to vote according to religious and caste affiliations as the BJP, AAP and Third Front seek broader appeal with messages of good governance, economic development and anti-corruption.

By Shawn Greene

DELHI – India’s Election Commission has announced the dates for this year’s highly anticipated general election, which will be held in nine phases in April and May.

Polling for the 16^th Lok Sabha (lower house of Parliament) will begin April 7 and conclude May 12. Votes will be counted on May 16, and the new Parliament must be constituted by May 31.

With more than 800 million eligible voters –100 million more than in the 2009 general election – India’s upcoming election will be the single-largest in world history (more Indians are currently registered to vote than the combined population of Europe).

Voters in the country will cast their ballots on 1.7 million electronic voting machines at 930,000 polling stations nationwide, now featuring a new “none of the above” option for voters not wanting to cast their ballot for any of the listed candidates.

Administrative costs for the election will exceed US$645 million, and more than 11 million government workers are expected to play a role in the massive administrative undertaking.

“Indian elections are always colorful and this one promises to be more so. A new generation of younger politicians is entering the fray for the first time, and will perhaps be more open to India’s development needs as a young nation in its own right – the average age in India is just 27,” commented Chris Devonshire-Ellis, founding partner of Dezan Shira & Associates and managing partner of the firm’s India offices.

“Democracy has not always been kind to India and the nation needs a government in place with a mandate to rule and to take urgently needed tough decisions. No one party will reach a majority, but the outcome really comes down to who can best form a working coalition at this turning point for India in its demographic change to becoming a wealthy nation and global manufacturing base,” he continued.

According to recent numbers, no party is expected to win an outright majority in Parliament (something that has not occurred since 1989) despite the opposition Hindu Bharatiya Janata Party (BJP) and its leader, Narendra Modi, enjoying a substantial lead in opinion polls.

The BJP’s main opponent, the incumbent Indian National Congress Party, is expected to be dealt a crushing defeat this May, with nearly seventy percent of Indians saying they are dissatisfied with the way things are going in India today, according to a new Pew Research Center survey released last week.

Despite widespread corruption in Indian society, the nation’s elections are widely considered to be free and fair with a spending cap of US$1.1 million per seat on campaign expenses, and a consistently high turnout among the nation’s poorest voters.

According to voting patterns in previous elections, Indian voters have a strong tendency to vote according to their religious and caste affiliation. This year, however, India’s slowing economy and repeated corruption scandals involving the Indian National Congress Party have shifted the allegiances of many voters to the BJP and year-old Common Man Party (Aam Aadmi or AAP).

Both parties expect messages of good governance, economic development and anti-corruption to have a broader appeal to voters that transcends these traditional affiliations and breaks historical voting patterns.

The Main Contenders

India’s Lok Sabha has a total of 543 elected seats, and a party or coalition needs a minimum of 272 MPs to form a government.

The country’s two major parties, the incumbent Indian National Congress Party (INC) and Bharatiya Janata Party (BJP), will be opposed this year by 11 smaller regional parties that have formed a Third Front to counter the INC’s United Progressive Alliance (UPA) and the BJP’s National Democratic Alliance (NDA).

The INC and Rahul Gandhi – The incumbent INC is widely considered to be a center-left party on the Indian political spectrum, and has historically been associated with, and led by, the Nehru-Gandhi family. After emerging as the single-largest party in the Lok Sabha in the 2009 elections, the INC formed the UPA coalition. In recent years, however, the INC’s popularity has ebbed in light of several corruption scandals (such as the 2G spectrum scam) and the gradual weakening of India’s economy.

Rahul Gandhi, vice president of the INC and leader of the party’s election campaign, became an icon of the INC after PM Manmohan Singh announced he would not seek the prime ministership again this year. His mother, Sonia Gandhi, served as president of the INC for several years before leaving in 2011 due to an undisclosed illness. Since then, Rahul has played an increasingly prominent role in the INC’s national election campaign after Sonia Gandhi appointed her son to head the party’s six-member committee charged with implementing alliances, updating the party manifesto and generating publicity. It remains unclear whether he is slated to be a prime ministerial contender for the INC, however.

The BJP and Narendra Modi– A Hindu nationalist political organization running on the somewhat non-traditional platform of good governance and economic development, the BJP enjoys a substantial lead in most polls and made major gains in state elections late last year (typically a good indication of how a party will fare in federal elections). The BJP’s coalition, the NDA, is mostly composed of center-right political parties.

Narendra Modi, the BJP’s official prime ministerial candidate and chief minister of Gujarat state, is considered by many to be a very controversial political figure in India. Originally known for leading Gujarat during the 2002 riots, Modi has sought to soften his Hindu nationalist rhetoric in recent months to broaden his appeal to Muslims and other Indians frustrated by the current economic climate. Presiding over the strongest state economy in India during his governorship, Modi has campaigned for the BJP on a platform of economic growth and development, and is notably popular among India’s business elite.

The Third Front – On February 25, eleven regional parties in India came together to form the so-called “Third Front,” a new political coalition that will oppose the UPA and NDA in national elections this year. Consisting of four left-wing parties and seven regional ones from politically important states such as Uttar Pradesh, the parties included in the coalition held 92 seats in the 15^th Lok Sabha and now represent the third-largest political grouping in the country. While details are still emerging after the Third Front’s formation last week, the parties’ leaders have declared that anti-corruption efforts, the protection of secularism and implementation of “pro-people” development policies would be the cornerstones of their national election campaign.

The Wildcard

The AAP (Common Man Party) and Arvind Kejriwal– India’s newest political party, the AAP, is set to be the wildcard in this year’s national election. Led by Arvind Kejriwal, who served a brief stint as chief minister of Delhi until his resignation last month, supporters of the AAP wield brooms and white caps to symbolize the party’s platform of anti-corruption and the cleansing of India’s political establishment. After claiming 28 of 70 legislative seats in the Delhi elections in December, the AAP’s political debut has been unusually strong for India, and the party has been especially successful in utilizing the same small donation tactics popularized by U.S. President Barak Obama in the 2012 elections. This is exemplified by a 260 percent increase in donations increased after clashes with the BJP last week following Kejriwal’s brief imprisonment.

Originally a mechanical engineer from IIT-Kharagpur, Kejriwal joined the Indian Revenue Service in 1995 as a tax official. Six years later, in 2001, he left his post to team up with activist Anna Hazare to embark upon a career as an anti-corruption campaigner – successfully demanding the passing of the anti-corruption Lokpal Bill late last year. Transitioning from tax official to political celebrity virtually overnight, Kejriwal’s decision to resign as chief minister is viewed by many as a strategic move that has allowed him to focus his efforts on the AAP’s national election campaign.

The Risk

Conducting general elections in one of the most populous and ethnically diverse countries in the world can be a decidedly precarious undertaking.

After the government announced the timeline for elections on March 5, violent clashes between supporters of the BJP and AAP broke out in in Delhi and Lucknow following the detainment of AAP leader Arvind Kejriwal in the BJP-controlled state of Gujarat. Similar confrontations between supporters of the BJP and INC, and those of smaller parties such as the AAP and members of the Third Front, have become increasingly common in recent months as up-and-coming parties begin to pose an increasingly formidable challenge to the old guard at the national level.

Foreign investors and companies with operations in India should anticipate a marginally higher risk for political instability and social unrest around India’s general elections, and plan ahead to ensure productive activities are not disrupted. While the risk of significant instability is minimal, some resources should be allocated to examining local political factors that may influence business operations as a general rule.

The Big Picture

India’s general election will be an exciting time for foreign investors. With weaker-than-expected economic growth last quarter, easing India’s FDI regulations and reviving the nation’s economy have become the core focus for political contenders this year. Even if the INC can somehow retain control of the Lok Sabha, high expectations from India’s electorate for strong economic growth will compel the 16^th Lok Sabha to take substantial action to make India more appealing to foreign investment.

As India’s national elections inch ever-closer, readers can stay up to date with the latest business, investment and political trends across India by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam in addition to alliances in Indonesia, Malaysia, Philippines and Thailand as well as as well as liaison offices in Italy and the United States.

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