According to Morgan Stanley, due general lack of preparedness of key political parties plus administrative issues to conduct elections on short notice, general elections are unlikely in 2013

The political class is entering into election mode and the worst outcome of the new round of political uncertainty is an unfavourable shift in the fiscal towards social spending. The best result is that the government lifts the pace of reforms to reignite growth—because that will be critical to winning elections. Thus, project spending could get a lift in the next six months, says Morgan Stanley in a research note.

According to the research note, the market does not detest elections. “Indeed, it tends to trade flat or up ahead of elections. Industrials could be the big beneficiary so watch for performance of mid-caps in that sector,” the note said.

Voters gunning for development, governance and security

Morgan Stanley says according to its analysis of important elections from the past three years, there are three overreaching voter issues, security, development and governance (read: corruption).

History could be a poor guide for predicting election results

According to the research, long-term history of India's general elections could be a poor guide on four grounds, new voters, use of technology, rise in debt and higher voter turnout.

a) 120 million new voters will join the list from the last general elections, i.e. 17% of the 2009 voting population and 29% of those who actually cast a vote. Note the Congress party won 29% of the vote polled in 2009.

b) Technology will play a greater role. Not only has social media spread but cable television penetration has grown from 54 million to 132 million households over the past decade.

c) Young India’s rising aspirations alter the debates. These aspirations are best evidenced by the rise in debt, which represents the desire to spend future income. Nominal household debt added in the past five years exceeds the total debt households held in 2007.

d) Voter turnout is on a structural rise and that could be attributed to the importance young people accord to exercising their franchise. Given the number of first-time voters in the next elections and their agenda, expect surprises galore.

Elections fought over single ideas yet electorate is fragmented and diverse

Arguably, India’s potential growth rate has declined due to multiple factors and the risk of social chaos has risen amidst rising aspirations. The country needs assertive leadership to fix these issues, which could be the single idea to influence the results of the next general elections. To that extent, providing clarity on who will lead the government may work to the advantage of the concerned party. However, this is not as simple as it sounds given the nuances of coalition politics, says Morgan Stanley.

Who will be India’s prime minister in the 16th Lok Sabha?

Morgan Stanley sees a new face as India’s next prime minister. The research note discusses nine name, three each from the Congress and Bharatiya Janata Party (BJP) and three other candidates, who would be key players to watch. Here are the names and reasons given by Morgan Stanley…

BJP

a. Narendra Modi: Phenomenal success as Gujarat CM and strong support from the party. The market will likely give a big thumbs up to ‘Namo’.

b. LK Advani: Old warhorse of the BJP with considerable respect across the political spectrum.

c. Sushma Swaraj: National leader who has approval from at least one of BJP’s crucial allies. Currently leader of the opposition in the Lower House.

Congress

a. P Chidambaram: Another person that the market would likely applaud, ‘PC’ comes with a strong track record as a minister in the four different governments over 20 years.

b. Rahul Gandhi: Has denied ambitions to be the PM but his party people will favour him strongly.

c. AK Antony: Trusted advisor of the Gandhi family and a relative non-controversial record as defence minister make him a favoured candidate post elections.

Others

a. Mulayam Singh: Will hope to convert current stronghold in UP into more seats and stake a claim for the leadership of a third-front government.

b. Nitish Kumar: An ally of the BJP and could emerge as a consensus candidate in a post poll mix.

c. Mamata Banerjee: Aspirant for the position but may not enjoy support from other allies

Seven states critical to final result

According to Morgan Stanley, seven states, Uttar Pradesh, Maharashtra, Andhra Pradesh, West Bengal, Bihar, Tamil Nadu and Orissa could play important role in deciding the ruler at Delhi. These are the states that control about 312 Lok Sabha seats, out of which 142 seats are controlled by partners (past and present) of either Congress or BJP. Any party that can grab these seats would get to rule Delhi.

Role of regional parties

No doubt, regional parties have gained a share in the national vote over the past two decades. However, a resurgence of one of the two big national parties (Congress or BJP) should not be ruled out. History suggests that the results in six states will be crucial to the overall outcome, says the research note.