The Prime Minister (PM) of India, Narendra Modi probably has a big chance to win the 2019 general election. However, Narendra Modi faced with the challenge of the fragile prospects of the Indian economy, if he wins the election and runs the second period of his administration. Observers considered that the strong support for the Bharatiya Janata Party (BJP), which carries Narendra Modi as Prime Minister (PM) of India, among others, driven by the success of Narendra Modi’s government in increasing investor confidence during his five years of leadership. Besides that, the handling of Narendra Modi who is firm about tensions with Pakistan considered to increase the chances of winning the BJP Party in the biggest general election in the world, which held in stages on 11 April-19 May 2019.
Investors also saw good reasons for the victory of the ruling party in the polls because the Indian stock market has been running well for the past five years. Since Modi’s inauguration in May 2014, India’s largest stock index, Nifty, has increased 28 percent against the US dollar (US), while the MSCI Emerging Markets index has lost around 1%. However, there are some challenges that could threaten the second period for Modi, one of the most serious is the pressure of funds that have been trailing short-term money markets since September 2018, due to defaults from extensive infrastructure and IL & FS financial groups.
Tension has focused on non-bank financial companies or NBFC, which relies heavily on wholesale funding and has been an important driver of India’s credit growth in recent years. In months of crisis, retail investors remain suspicious of fixed-income mutual funds that play a key role in the debt market. That has pushed borrowing costs for middle creditors, namely the deployment of Triple A and Single A debt letters has increased by more than 140 basis points since September 2018, to almost 3.8 percentage points.