The prospect of an unexpected electoral outcome in India- that is, Modi not forming a government- is one of the 10 top emerging market risks listed by the FT. The stock market has surged on the back of such an expectation; if it is not met, there could be a steep reversal.
The more interesting part of the list is that three of the 10 risks relate to China- a failure to respond to stimulus, a property bubble burst and a collapse in the shadow banking sector.
On a macro-view, there has been a 180 degree turn in the economic outlook. Post the financial crisis, advanced economies were in trouble; emerging markets looked poised to continue rapid growth. Now, it appears advanced markets will recover while emerging markets face a slew of problems related to deep-seated structural factors. For an insight into this, see the IMF's latest WEO.
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This is where I tend to dis-trust economists. Sorry brothers, but I as a commercial layman am never able to discern your thought-process, which if not sporadic, is not economist.
First, it was US-weak and BRIC-strong. Now its just flip side.
On Modi not being PM - I agree it is a black swan. And we ourselves are to blame for it. We need to draw line between crediting and over-crediting. "Modi" as a subject is now over-discussed and much hyped. I'm afraid it does not bounce back on BJP...
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