A pedestrian walks past election campaign posters for the Janata Dal (Secular) Party in Bengaluru, Karnataka, India, on Wednesday, March 14, 2018. Prime Minister Narendra Modi is pulling out all stops in his campaign to win the southern Indian state of Karnataka as he works to halt the opposition’s momentum and smooth his way to re-election in 2019. (Bloomberg)

Indian Prime Minister Narendra Modi has reason to feel less confident about the coming general election than he once did. His popularity has suffered as a result of a sharp economic slowdown last year that his government helped engineer via a chaotically implemented sales tax and the sudden withdrawal of most bank notes. Corruption scandals at state-owned banks haven’t helped, while the low oil prices that once gave Modi a degree of budget leeway are a thing of the past. That’s helped push India’s currency to record lows, stoking inflation and worsening the country’s finances. The opposition, in disarray since Modi’s resounding victory in 2014, is also beginning to unite. Despite all that, polls suggest the ruling coalition is likely to win the most seats in the election.

1. When exactly is the election?

Probably the first quarter of 2019, since the next government must be in place by mid-May and voting occurs over the course of several weeks. That’s a consequence of the daunting logistics of overseeing the world’s largest electorate: more than 800 million voters stretching from the remote Himalayas in the north to the tropical jungles of the south.

2. Will Modi retain power?

India’s chaotic politics are difficult to predict, but he’s the favorite. The country’s $2.6 trillion economy is back on track, his reputation as an incorruptible leader is largely intact and his Bharatiya Janata Party, or BJP, has expanded its control over powerful state governments. No other political leader is as popular as the 67-year-old Modi, who has nurtured an image as a humble son of a tea-seller single-mindedly dedicated to modernizing the country. One poll in 2017 showed close to 90 percent of Indians surveyed had a favorable view of him. But those policy misfires and an anemic job market have clouded the water. The BJP recently lost coalition partners in two states (Andhra Pradesh and Kashmir) and a poll in May found nearly half of respondents thought Modi’s administration did not deserve another term. A Pew Research Center poll in September showed confidence in the economy had collapsed, with 56 percent of those surveyed saying the state of the economy was good compared to 83 percent a year earlier.

3. Who is Modi up against?

The main national opposition is the Congress Party, which has ruled India for most of its independent history and is led by Rahul Gandhi, the scion of the Nehru-Gandhi dynasty. Polls suggest the 48-year-old Gandhi alone doesn’t present much of a threat. But there are also the powerful anti-BJP leaders of some of India’s huge states, many with populations larger than most western countries. Several already teamed up to take on the BJP -- most notably in by-elections in Uttar Pradesh and Bihar, and in state elections in Karnataka, where Modi won the most seats but lost power to a coalition.

4. So Modi is struggling at state level?

Hardly. A record 20 out of 29 states are now ruled by his BJP, including the most populous (Uttar Pradesh), the largest (Rajasthan) and the richest (Maharashtra, whose capital Mumbai is India’s financial hub). Under Modi and BJP President Amit Shah, the party has made inroads beyond its traditional northern support base, amassed corporate donations, expanded a successful social media unit and deployed thousands of grassroots activists to shepherd voters to the polls. Modi is better organized, better funded and enjoys more widespread support than any single rival. One caveat: What works at state level in India does not always resonate nationally. On the other hand, Modi has a knack for confounding pessimistic predictions.

5. What about social issues?

As Hindu nationalism has flourished under Modi, attacks against Muslims and so-called lower-caste Hindus have proliferated. There’s been an epidemic of violence against women, including the rape and murder of young girls. Modi’s image has suffered because of the reaction by senior party members (one minister presented garlands to a lynch mob) and by his own slow responses. Social tensions are likely to remain high, or escalate, if the election is tight. In a closely contested state election in December, Modi accused the BJP’s adversaries (including a former prime minister) of colluding with India’s arch-enemy Pakistan. All the same, Indian voters historically have been moved more by the price of onions and tomatoes than political shenanigans. (Economists expect inflation to accelerate next year.)

6. How might the voting pan out?

Replicating the BJP’s single-party majority in the lower house, the first such majority in 30 years, will be tough, judging by the polls. A reduced majority might imperil Modi’s economic reforms, raise the likelihood of party infighting and strengthen his coalition partners’ leverage. An August poll by India Today showed the BJP had lost popularity, but was still likely to win the election. However, much depends on whether India’s myriad opposition parties can form a united front against Modi. If Congress can unite with big regional parties, the same poll showed the opposition was in striking distance of forming the government. However, the BJP has surprised on the upside before. And if the party gains a similar or larger mandate, Modi could be emboldened to tackle more controversial reforms such as making it easier for companies to acquire land and fire workers.

7. What would a bad result for Modi mean for investors?

Markets would take it badly. In recent state elections, the prospect of BJP victories has rallied markets while predictions of defeat have sunk them. Investors see Modi as a relatively predictable pro-business leader dedicated to pushing through economic reforms -- even if those policies occasionally veer toward populist. Whether Modi is as pro-business as investors think is a matter of debate in India, with many arguing he’s more concerned about consolidating power than carrying out genuine reforms. On the other hand, the stock index has significantly outperformed most other emerging markets since 2014. And Modi has sought to address longstanding issues such as bad loans at banks and indebtedness at state-owned companies, while luring record foreign investment and pushing through badly needed tax reform.

To contact the reporter on this story: Iain Marlow in New Delhi at imarlow1@bloomberg.net

To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Grant Clark

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