Preeti Soni

Former central bank governor Raghuram Rajan said that whether Prime Minister Narendra Modi comes to power for the third time or not, India will maintain the direction of its economic policy.

“There is a lot of continuity in Indian policy,” Rajan said in an interview with Bloomberg TV’s David Ingalls on Tuesday. “Any government that comes in will take forward a lot of the good work that has been done and continue it.” Rajan, now a professor of finance at the University of Chicago Booth School of Business, was speaking on the sidelines of the UBS Asian Investment Conference in Hong Kong.

He said the new government would announce a budget soon after coming to power, which would likely focus “on all the good things, but also look at what other changes can be made.”

India’s six-week-long elections end on June 1, with results expected on June 4. Modi’s Bharatiya Janata Party is widely expected to return to power, although there is uncertainty about whether it will be able to expand its majority as Modi has predicted. Financial markets are bracing for a potential sell-off if the BJP loses support, as it fears a move away from economic reforms.

Rajan said infrastructure spending under the Modi government was necessary given the huge deficits in the country. However, going forward, India needs to focus on the quality of its infrastructure and ensure that investments don’t just benefit large industrial firms.

Bloomberg Economics estimates that India will spend 44.4 trillion rupees ($534 billion) on building new infrastructure between 2024 and 2026, helping boost economic growth to 9 percent by 2030.

first published: 28 May 2024 | 11:40 am First

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