India post-election: Risks for corporate entities with operations in the country

While PM Modi has now been sworn into his third term, his party suffered a major blow losing the majority of the Lok Sabha, India’s Parliament. As a result, Modi’s Bharatiya Janata Party (“BJP”) had to form a coalition with other parties to win against the Indian National Congress and its coalition.

During these past elections, a few regions have demonstrated a split from the BJP including Kashmir & Jammu, Uttar Pradesh, and South Indian states. As a recap, the following took place during Modi’s last two terms:

• purchasing of Russian oil otherwise subject to sanctions by the West,
• widespread protests by farmers fearing financial collapse,
• increased female seats in the Lok Sabha,
• a Muslim “ban” regarding pathways to citizenship, and
• the revocation of Kashmir’s special status.

Despite the above controversial changes, India continues to benefit from a rapidly growing economy. India enjoys an annual economic growth per year which has consistently been above 7% over the past few years. If India continues on the trajectory of the world’s fastest growing economy, it will become the world’s third largest economy well before the end of this decade. Multi-national corporations have setup Indian subsidiaries or utilise Indian service providers for their data and IT operations.

But what does this mean in terms of corporate risk for companies with operations in India?

Below are issues that MNCs should be aware of:

Violence against ethnic and religious minorities

As demonstrated by Modi’s previous terms and his governance in Gujarat, violence against minorities especially Muslims, Christians, and Sikhs are not unprecedented. Violence in Uttar Pradesh over the Babur Mosque/Ram Mandir have led to regional unrest and violence against Muslims over the decades until the Temple devoted to the main god of Hinduism, Ram, was consecrated earlier this year.

Furthermore, Modi’s Hindutva, far-right Hindu nationalist movement, has often put larger cities such as New Delhi on high-alert for religious violence, not only against Muslims but also against Christians advocating for conversions.

Companies operating in large cities with a history of religious violence or high populations of ethnic minorities should be aware of these risks and be able to respond in a way to protect its employees and service providers.  

Rising temperatures

India has hit record-levels of heat this summer even during the elections. Heatwaves across the country have reached well over 45C (115F) resulting in at least several dozen deaths.

Engineers in India have also warned of sustained rolling blackouts as power demand has risen during this time. According to the World Weather Attribution, heatwaves in India are now thirty times more likely due to climate change.

Multi-national corporations with offices in India should appropriately address this issue and consider offering alternative work arrangements or ensure adequate ventilation and air conditioning in the office whilst keeping in mind that the grid could be overwhelmed if every office did this.

Caste discrimination issues

Caste discrimination is often subtle and enmeshed with other issues such as labour and employment issues, university admissions or farmers protests.

The Reservation System is essentially affirmative action which reserves a certain percent of seats in civil service and universities for Scheduled Castes & Tribes in India which includes the Dalit “untouchable” caste.

Recently, protests in India in relation to the rigorous medical school entrance exams have demonstrated the hyper-competitive environment as well as accusations of cheating. Rather than focusing on the fact that university seats are not expanding in proportion to the population, current rhetoric about the Reservation system often criticizes the Scheduled Castes for not being admitted on merit.

Furthermore, this last election saw a realignment of different castes in their political support with some appealing to the INC’s promise to remove the Reservation cap and hold a caste census. At the same time, it should be noted that mistreatment of Dalits, especially in rural areas, still exist with nearly 10 Dalit women raped daily in India according to the National Crime Record Bureau of India.

As such, caste discrimination and rhetoric about this issue could lead to a reputational and legal risk for employers who fail to appropriately address this issue.

As many companies continue to operate or use Indian suppliers, senior management should be aware of political issues that could impact their employees or service providers.