NEW DELHI, INDIA – MAY 04: Bharatiya Janata Party (BJP) leader and Indian Prime Minister Narendra Modi (C) welcomes people as he arrives at the party headquarters to deliver a victory speech in New Delhi, India on May 04, 2026. BJP has emerged victorious in the West Bengal and Assam state assembly election results. (Photo by Imtiaz Khan/Anadolu via Getty Images)
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Indian Prime Minister Narendra Modi’s Bharatiya Janata Party scored a historic election victory in West Bengal on Monday, strengthening its hold on power as the country grapples with economic challenges and an urgent need for reforms.
Modi’s popularity was seen declining when, in June 2024, his party failed to win an absolute majority in the national elections and he had to form a coalition government for his third term as Prime Minister.
Since then, the Indian government has been spending money on populist welfare schemes and, more recently, fuel subsidies, but experts said the strengthening of Modi’s political popularity could provide room to rationalize some of that spending.
Latest state election results allay concerns of Modi losing political momentum BJP won 206 out of 294 seats. In West Bengal, formed its first government at the state level.
In a post on X after the results, Modi announced: “Lotus blooms in West Bengal!” Hinting at his party’s election symbol. He said, “People power has won and BJP’s politics of good governance has won.”
Of the 11 state elections since 2024, the BJP and its allies have retained power in four states and won power in two others, reflecting the “continued popularity of PM Modi and his party”, the global brokerage said. City Mentioned in a note on Monday.
“The market would expect that a stronger political mandate and easier coordination with state(s) governments will help in better implementation of various policy and process reforms,” Citi said.
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The Indian government has been reluctant to pass on the burden of rising energy costs to consumers and has instead taken a “huge hit” to tax revenues by cutting central excise duty on fuel to prevent pump prices from rising.
Along with fuel subsidy, the government is also spending money on populist measures. More than a dozen Indian states plan to spend up to 2.5 trillion rupees ($26.2 billion), or 0.5% of gross domestic product, on unconditional cash transfers to eligible women to help cover household expenses, Bernstein Research said in a report on April 23.
“This victory certainly strengthens the government politically to take tough decisions at a time of economic crisis caused by the Middle East war,” said Ashok Malik, partner at public policy think tank The Asia Group, on a call with CNBC.
The government will have scope to “increase prices” of energy products, he said, adding that some populist spending or rationalizing welfare spending will also be on the agenda.
But according to experts, more needs to be done to speed up reforms to address the economy’s underlying weaknesses, as long delays are pushing foreign investors towards alternative markets.
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Morgan Stanley said in a report on April 22 that India’s net foreign direct investment inflows are “close to an all-time low of $0.5 billion” in the 12 months ending January 2026. The bank said this trend is likely to continue.
Foreign portfolio investors also People are exiting India’s equity markets in record numbers. They have sold Indian shares worth more than $20 billion since January this year, more than the $18.9 billion they sold in 2025, according to Central Depository data. NSDL.
Rising fuel costs and the exodus of foreign investors have weakened Rupee against the dollar, sending it to record lows and deepening the economic crisis.
Meanwhile, India’s white-collar jobs in the information technology sector are shrinking as global artificial intelligence technology advances, and manufacturing jobs have not grown substantially. 45% of India’s population depends on agriculture, a sector that contributes only 15-16% to the economy.
The government’s last attempt at farming reforms failed in 2021, after facing intense opposition from farmers.
“Dominating the electoral map necessarily leads to faster reforms,” said Shumita Sharma Deveshwar, chief India economist at financial analysis firm GlobalData TS Lombard. “India really only improves when it is in crisis,” he said.
According to experts CNBC spoke to, for now, the electoral victory in the state elections has given the BJP and its allies a two-thirds majority in the upper house of Parliament, but the lower house still lacks the strong mandate needed to pass tough reforms.
