Modi Seeks to Shore Up His Coalition to Secure Third Term

(Bloomberg) -- Indian Prime Minister Narendra Modi met for coalition talks after his party lost its majority in parliament, forcing him to rely on allies to form a government for the first time since he stormed to power a decade ago.

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Modi’s Bharatiya Janata Party needs to secure the support of two regional allies, who are notoriously unreliable, to stay in office for a third term. A spokesman for one of the parties, Janata Dal (United), confirmed Wednesday it gave a letter of support to the BJP and will remain in the alliance.

The other ally, N. Chandrababu Naidu of the Telugu Desam Party, reaffirmed his support for the NDA before heading to a meeting of the coalition partners in New Delhi on Wednesday. “We are in NDA,” Naidu told reporters. “I am going for a NDA meeting. In the course of time, if anything, we will report to you.”

Official results Tuesday showed the BJP-led coalition secured enough seats to form a government if it sticks together, although the party remained short of the 272-seat majority on its own.

Modi was confident he would stay in office, telling cheering supporters at his party’s headquarters on Tuesday night that the “NDA has won a mandate to form the government” for a third straight term.

The coalition talks may not be straightforward, though. Since taking office in 2014, Modi hasn’t had to share power in the government, and will likely have to make concession to alliance partners to win their backing.

“There’s going to be a pound of flesh extracted by the coalition partners that have implications for policies,” said Irfan Nooruddin, a professor of Indian politics at Georgetown University. “I think for the BJP itself there’s going to be a really serious reckoning.”

Leaders of the two parties Modi will need to woo have a history of switching sides, and only joined up with the BJP a few months ago, making it unclear whether they will stick with the coalition or back the opposition bloc.

The opposition alliance led by the Indian National Congress is also set to meet Wednesday evening to shore up support with its partners, and potentially find a path toward forming its own government.

The opposition bloc has reached out to the two kingmakers, Nitish Kumar of Janata Dal (United) and Naidu of the Telugu Desam Party, which together hold 28 seats, according to people familiar with the matter, who asked not to be identified as the discussions are private. The Congress party is willing to support Naidu as a candidate for prime minister if his party joins the bloc to form a government, the people said. The situation is fluid, though, the people cautioned.

Exit polls released over the weekend had showed Modi would coast to an easy victory in the marathon, six-week election. Before voting kicked off on April 19, the prime minister had boldly predicted that his alliance would win a whopping 400 seats.

The result is a stunning disappointment for the 73-year-old leader, who has been the main face of the BJP’s election campaign and built the party primarily around himself. Besides raising questions about Modi’s own future as prime minister, a weak coalition government will likely make it difficult for him to push through tough economic reforms or further his Hindu nationalist agenda, assuming he returns to power.

The opposition bloc, spearheaded by the Congress party’s Rahul Gandhi, grew its support by tapping into voters’ concerns about India’s growing inequality, pervasive joblessness and rising living costs.

Modi had looked unbeatable heading into the election, backed by one of the world’s fastest-growing economies and the fulfillment of key promises appealing to India’s Hindu majority, including the building of a temple on the site where a 500-year-old mosque had been torn down.

Signs of trouble for Modi emerged after the first of seven rounds of voting. A dip in turnout triggered a broad get-out-the-vote effort that saw Modi adopt a more strident tone, firing up his Hindu nationalist base with divisive anti-Muslim rhetoric and attacks on the opposition’s welfare policies.

Many of the BJP’s alliance partners don’t share the Hindu nationalist views that are core to the BJP agenda. That means that the BJP could be forced to dial back some of its divisive rhetoric and set aside ambitions to more aggressively reshape India into an overtly Hindu nation. A weakened coalition may also force the BJP to offer cabinet posts and other concessions to alliance partners, while it may struggle to enact ambitious economic reforms needed to turbocharge growth.

Even with a reduced mandate or a change in government, India’s growth trajectory should largely remain positive. India also has a long history of coalition governments, which have been credited with producing noteworthy achievements, such as the opening of the Indian economy in the early 1990s.

Modi’s weakened mandate “will make the passage of contentious economic reforms more difficult,” said Shilan Shah, an economist at Capital Economics. However, the new government “could still do enough to keep potential growth at 6-7%,” he said. That would leave the economy on “course to more than double in size over the next decade,” he predicted.

--With assistance from Dan Strumpf and Ruchi Bhatia.

(Updates with letter of support from one of the parties.)

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