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India will stick to its policy path even if Modi loses, Rajan says

(Bloomberg) — India is likely to continue its economic policy trajectory regardless of whether Prime Minister Narendra Modi wins a third term or not, says former central bank governor Raghuram Rajan said.

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“There is a lot of continuity in Indian policy,” Rajan said in an interview with Bloomberg TV’s David Ingles on Tuesday. “Whatever government comes in will take many of the good things that have been done and continue with them.” 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.

The new government will announce a budget soon after it comes to power, which will likely focus on “all the good things that are happening, while trying to see what other changes need to be made,” he said.

India’s six-week elections end on June 1 and results are expected on June 4. Modi’s Bharatiya Janata Party is widely expected to return to power, although there is uncertainty over whether it will be able to expand its majority as Modi has predicted. Financial markets are bracing for a possible sell-off if the BJP loses support amid concerns over a possible shift in economic reforms.

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Rajan said the infrastructure spending under the Modi government was necessary considering the huge shortcomings in the country. However, going forward, India must focus on the quality of its infrastructure and ensure that investments do not only benefit large industrial companies.

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

–With help from Anup Roy.

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