Prime Minister Narendra Modi’s honeymoon with India’s voters is officially over. Delhi residents delivered his Bharatiya Janata Party a crushing defeat in a state election just nine months after helping sweep him to national power with the biggest mandate in 30 years. While it has little effect on his ability to push key bills through parliament, the sweeping loss emboldens Modi’s opponents and puts pressure on him to deliver.
“It will shake the government up and may prompt them to quickly implement policies that were promised,” said Jyotinder Kaur, an economist at HDFC Bank Ltd. who is based near New Delhi. “A little bit of soul searching is good for everybody.”
Modi’s earliest chance to regain political momentum will be in a parliamentary session later this month, when his government unveils its first full-year fiscal budget. Economists including central bank Governor Raghuram Rajan are looking for him to shift spending from subsidies to investments that create supply and ease one of Asia’s fastest inflation rates.