India Springs Election Surprise, Sends Equity Market Crashing With Uncertain Implications for Crypto

As a researcher with extensive experience in India’s political and financial landscape, I find the election results underwhelming for Prime Minister Narendra Modi’s ruling Bharatiya Janata Party (BJP). The initial indications suggest that the party will continue to govern, albeit with less power than anticipated.

As a researcher examining the Indian general elections, I was taken aback by the unexpected outcome that saw Prime Minister Narendra Modi’s party receiving fewer votes than anticipated based on initial returns. This result has led to a significant downturn in the stock markets and may postpone crypto legislation indefinitely.

As a crypto investor, I’m following the political developments in India closely. The Bharatiya Janata Party (BJP) and its allies are expected to win the elections, but they fell short of the predicted supermajority of 370 seats in the 543-seat lower house of parliament. The BJP itself didn’t even reach the halfway mark of 272 seats that it had comfortably crossed in the previous election. This outcome gives significant bargaining power to the allies, and the Indian National Congress-led opposition could try to woo them with attractive deals.

On June 1, based on exit polls, I had anticipated a clear-cut victory for the BJP and its allies, leading to significant gains for India’s stock markets. However, as vote results started coming in on Tuesday, these markets experienced a massive reversal, with over $350 billion in value erased within hours. The Nifty and Sensex indices plummeted by up to 8.5% at their lowest point before partially recovering.

“The unexpected election outcomes took everyone by surprise, according to Rajagopal Menon, vice president of Indian cryptocurrency exchange WazirX. In the immediate aftermath, markets are likely to experience volatility due to unease over instability. However, once a new administration is in place, normalcy should be restored.”

In the largest democracy of the world, crypto matters took a backseat during political campaigns, being insignificant at best for voters. Regardless of the election outcome, any impact on crypto regulations in India was not anticipated to be immediate. The country’s stringent rules regarding cryptocurrencies, including the 1% tax levied on each transaction, were expected to remain unchanged.

As a researcher studying the policies of the Modi government regarding cryptocurrencies, I can share that during its tenure as president of the G20 nations last year, there was a focus on collaborating with other countries to establish a coordinated approach in framing crypto regulations.

The prospect of extensive cryptocurrency legislation, which is eagerly anticipated by the industry, may be delayed due to the pressing need to form a stable government coalition and address partners’ policy demands. A potential shift in one of the key roles shaping crypto policy in India could occur, as Finance Minister Nirmala Sitharaman, currently occupying that position, might be replaced.

In terms of cryptocurrency regulation, Menon stated that there are currently no major shifts taking place. India is part of the G20’s ministerial declaration, which sets out a definitive plan for regulatory frameworks by 2025. The crypto regulatory landscape is expected to become more active towards the end of this year.

come the last months of 2023, a prominent BJP politician shared with CoinDesk his belief that extensive regulations for the crypto sector would likely not materialize until around mid-2025; the opposition parties have yet to propose a clear direction for the Web3 environment.

In their political platforms, neither the BJP nor the Indian National Congress explicitly used terms such as “cryptocurrency,” “blockchain,” or “Web3.”