India Calls Election as Modi Rise Threatens Congress Rule

Photographer: Vivek Prakash/Bloomberg

Supporters cheer beneath a banner featuring Narendra Modi, prime ministerial candidate of the Bharatiya Janata Party (BJP), during a rally near Bhagwanpura, Madhya Pradesh, India, on Feb. 26, 2014. Close

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Photographer: Vivek Prakash/Bloomberg

Supporters cheer beneath a banner featuring Narendra Modi, prime ministerial candidate of the Bharatiya Janata Party (BJP), during a rally near Bhagwanpura, Madhya Pradesh, India, on Feb. 26, 2014.

India will start voting next month to determine if Prime Minister Manmohan Singh’s ruling party can fight off a resurgent opposition and extend its decade-long rule of the world’s most-populous democracy.

About 815 million eligible voters, more than double the U.S. population, will pick 543 lawmakers in nine rounds of voting from April 7 to May 12, the Election Commission of India said today. Results will be announced on May 16 as votes are counted from the Himalayas to islands in the Bay of Bengal.

Polls show Narendra Modi’s Bharatiya Janata Party winning the most seats while falling short of a majority, as voters punish Singh’s Congress party for Asia’s highest inflation, an economic slump and graft cases. Smaller parties may hold the balance of power, prompting Moody’s Investors Service to warn that an unstable coalition may weaken the rupee and heighten risks to the credit rating of Asia’s third-biggest economy.

“A stable government in Delhi is the need of the hour and will be critical to the economic outlook,” said Soumya Kanti Ghosh, a Mumbai-based economist at State Bank of India, the country’s biggest lender. “The challenges for the new government will be to bring down inflation and curb subsidies and the fiscal deficit in an environment of slowing growth.”

Modi’s Rise

Modi’s rise has split the nation of 1.2 billion people, where violence between Hindus and Muslims has played a defining role in politics since Britain divided India and Pakistan in 1947. Proponents see Modi, 63, as a leader who can revive growth by scaling back subsidies and attracting investment, while opponents blame him for 2002 riots that killed about 1,000 people, mostly Muslims, and left him banned from the U.S.

Modi’s main opponent is Rahul Gandhi, the 43-year-old scion of India’s foremost political dynasty and vice president of Congress, after Singh said in January he wouldn’t stand for a third term. Gandhi has accused Modi of “abetting” the riots and is campaigning on the party’s record of spending on programs ranging from cheap food to guaranteed work in rural areas.

“We have never had an election before where the two main candidates have such contrasting visions of what direction to take India,” said Satish Misra, an analyst at the Observer Research Foundation in New Delhi, who has covered elections for more than three decades. “This election has the potential to radically alter the character and direction of the country.”

Regional Parties

In the middle are dozens of regional parties that now hold about 40 percent of parliamentary seats, as well as the year-old Aam Aadmi party, which formed the Delhi government after a strong showing in a December state election. Eleven smaller parties agreed in February to campaign as a bloc in the national vote to offer an alternative to the two main parties.

The police used water cannons to disperse Aam Aadmi supporters after they held a protest today outside of the BJP’s headquarters in New Delhi. They were protesting after their leader Arvind Kejriwal was briefly detained while campaigning in Gujarat, where Modi is chief minister.

The world’s biggest-ever election by voters will feature 930,000 polling stations and 1.9 million electronic voting machines, according to the election commission. A code of conduct also took effect that is supposed to bar the government making any policy decisions that could affect the outcome.

The BJP is forecast to win 217 seats in the lower house of parliament, short of the 272 needed for a majority, according to an opinion poll released on Feb. 22 by ABP News television channel and Nielsen. Congress would get 73 seats, its worst ever performance, the poll showed. Regional parties would split the remaining 253 seats, up from the 216 they currently control.

The winner will inherit an economy growing near the slowest pace in a decade as the central bank keeps interest rates elevated to bring down consumer-price inflation that has averaged about 10 percent over the past year. The government forecasts the $1.8 trillion economy will grow 4.9 percent in the year through March 31, less than the past decade’s annual average of about 8 percent.

Rupee Plunge

A plunge in the rupee last year after the U.S. Federal Reserve said it would taper monetary stimulus prompted Singh to narrow fiscal and current-account deficits as the central bank imposed emergency liquidity curbs. The rupee, down 12 percent in the past year, has climbed 10 percent since hitting a record low in August, the world’s best performer in that time.

Modi has promoted his image as a magnet for investment and a record of stronger-than-average growth in the western state of Gujarat, which he’s ruled since 2001. The state accounts for a quarter of India’s exports and has attracted investment from companies such as Ford Motor Co. and Reliance Industries Ltd.

In the past few years, Modi has improved ties with western nations that shunned him after the 2002 riots, holding meetings with ambassadors of the U.S., U.K., European Union and Australia. He has also blamed Singh for failing to take a harder line in border spats with China and Pakistan, which is bracing for turmoil as the U.S. reduces its presence in Afghanistan.

Gujarat Riots

The Gujarat riots followed the deaths of 59 Hindus in a train fire. In 2011, a lower court in the state sentenced 11 Muslims to death and 20 others to life in prison for conspiring to set the train ablaze.

While human rights groups accused Modi of failing to control subsequent violence and a member of his cabinet at the time is serving a prison sentence over the incident, he denies wrongdoing. A Supreme Court-appointed panel found no evidence that he prevented victims from receiving help.

Congress leaders have sought to discredit Modi over the riots as they fight off allegations of corruption, with Singh saying in January that Modi presided over a “mass massacre.” The national auditor has accused Singh’s administration of costing India as much as $53 billion through favoring certain companies in awarding mobile-phone licenses and handing out no-bid coal-mining permits.

The BJP will need to pass the 200-seat mark for Modi to attract enough coalition partners to become prime minister, according to Ramesh Dixit, a professor of politics at Lucknow University, based in the capital of Uttar Pradesh, the country’s most populous state.

“The BJP is trying to portray itself as the most reliable party to run the economy, while Congress is saying Modi cannot be trusted,” Dixit said. “It’s still too early to say what the final seat tally will be -- there will be more twists.”

To contact the reporters on this story: Andrew MacAskill in New Delhi at amacaskill@bloomberg.net; Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net

To contact the editor responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net

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