NEW DELHI: A steady rise in populist politics in today’s political environment poses a key risk for companies whose fortunes are closely tied to the Indian economy, warn analysts at JP Morgan Chase.
Despite the country relaxing Covid-19 related lockdowns, patchy economic recovery and low demand coupled with little fresh investment is worrying, the institution said, warning that the devastation from the pandemic is fostering conditions in which populist rhetoric thrives.
The falling share of income going to the lower and middle-income groups will likely also worsen this trend, it said. “Rising populism could impact market valuations, at least in part due to protectionist trade and foreign direct investment policies inhibiting growth,” it said in a note, adding that Thailand and the Philippines are among other Asian economies facing such risks.
The report comes in the backdrop of India tightening its FDI rules, especially for China and other neighbouring countries, in the aftermath of the Galwan Valley border standoff and the subsequent call for a self-reliant India.
“Populism is linked with weaker economic growth in the long-term, which could weigh on India’s rich equity valuations,” JP Morgan’s report said, adding that focus should on consumer, services and healthcare-oriented companies.