While Prime Minister Narendra Modi's Bhartiya Janata Party (BJP) did not secure an outright majority, PM Modi has returned to power for the third consecutive time in a decade, this time with a coalition government. How will this impact companies doing business in India?

PM Modi's track record

Under PM Modi's stewardship over the past decade, India's GDP per capita has risen from circa USD 1,500 to over USD 2,700 — helping to catapult India from being ranked the ninth to the fifth-largest economy in the world.1 India is now also consistently ranked among the International Monetary Foundation's (IMF's) top ten fastest growing economies in the world.2 Much of this momentum has been attributed to PM Modi's decisive leadership. With the BJP having secured a simple majority in both 2014 and 2019, PM Modi has had the freedom to be decisive with the implementation of his business-supportive policies.

Potential impact of coalition politics

There is an expectation that PM Modi's government will need to make some degree of compromise and adjustment to its policy and regulatory framework to accommodate its coalition partners. This may also affect the pace of regulatory reform. It is possible that PM Modi's BJP will likely need to adopt a more consultative and deliberative approach than we have seen in his previous two terms.

PM Modi's return suggests policy and regulatory continuity for the foreseeable future. This should continue to buoy economic growth and reforms in India.
— Ashish Chugh, Partner, Singapore

Opportunities through the "Make in India" initiative

The new coalition government is expected to continue promoting the "Make in India" initiative, a key pillar of PM Modi's economic policy thus far, aimed at boosting domestic manufacturing and exports as well as reducing import dependence.

Regional industries

This policy's core objectives of encouraging foreign investment and facilitating manufacturing infrastructure is expected to continue. However, coalition partners may well advocate for greater emphasis on supporting regional industries. Hence, while the overall business environment might remain favourable, business opportunities may arise from an increased focus on forming partnerships with local entities and contributing to regional development in India.

With the prospect of increased focus on regional industries, companies should prepare and consider how they might adapt to a more nuanced regulatory environment caused by coalition politics in order to leverage the benefits of the 'Make in India' policy.
— Ash Tiwari, Partner, London

Renewable energy

The new government is expected to continue its support of large-scale infrastructure and renewable energy projects (as well as foreign investments in solar, wind, green hydrogen and other renewable sectors) — given India's stated objectives of sustainable economic growth and reduced dependence on a carbon-based economy and the international commitments it has made in that connection.

However, it is yet to be seen whether the new government will be able to be as decisive with the implementation of its renewable energy projects when working with its coalition partners, many of whom will have their own regional goals and objectives.

Companies intending to do business in India should be prepared for changes in the regulatory landscape. The involvement of coalition partners may lead to increased regulatory scrutiny and more complex and lengthy processes in relation to the approval and implementation of large-scale infrastructure and renewable energy projects.
— Ashish Chugh, Partner, Singapore

Emerging technologies

Businesses considering doing business in India should also consider India's growth and adoption of advanced and emerging technologies, such as Artificial Intelligence (AI), 5G, biotechnology, and digital infrastructure. However, coalition partners may potentially advocate for more targeted policies and initiatives that align with regional development goals or address local challenges. They may also demand increased regulatory oversight with respect to such technologies.

Emerging technologies present a great opportunity for inbound investment into India. AI, 5G, biotech and other digital infrastructure continue to be a key focus for the new government given their critical role in India's economic growth and global competitiveness.
— Ash Tiwari, Partner, London

Key takeaways

The outlook is positive: India's new government is expected to broadly continue with policies and a regulatory framework that will make the business environment remain favourable, including to foreign investors, as well as to implement additional reforms that will further boost economic growth.

Coalition politics signals increased nuance: The dynamics of coalition politics may require companies to navigate a more nuanced policy and regulatory environment that seeks to balance national goals with regional interests. This should create opportunities for companies that are committed to investing in projects in sectors that remain a key focus for the new government and are agile enough to adapt their strategies to align with the evolving policy and regulatory framework in India.


1. Source: IMF World Economic Outlook – India GDP per capita data

2. Source: IMF World Economic Outlook 2024

This article is being provided as general information and does not constitute legal advice. Baker & McKenzie does not practice Indian law and where Indian law advice is needed, we work closely with top India-qualified lawyers. We’d be happy to discuss your needs in India. For more information, please contact Ashok Lalwani and Mini vandePol.

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