Raghuram Rajan, the former Reserve Bank of India Governor, said in an interview with BNN Bloomberg that the new Narendra Modi-led coalition will make the Indian government a lot more transparent about what it’s doing domestically and internationally, which could help thaw strained relations between India and China.

While Prime Minister Justin Trudeau congratulated India’s Narendra Modi on his re-election, he emphasized the importance of upholding the rule of law.

Diplomatic ties between India and Canada had reached a low point in 2023 after both sides, in a tit-for-tat response, expelled their top diplomats over the killing of a Sikh separatist leader.

Rajan said Modi being re-elected the way he was  will help improve things by forcing the country to be more democratic.

"India truly falls back into the set of democracies and democracies often find a set of values that allow them to work better with each other," he said. "The more democratic India is, the more mutual trust there's going to be in this kind of relationship and it will be beneficial for both countries."

Rajan attributed part of the diplomatic strain to the lack of checks and balances on the Indian government, which he suggested was increasingly becoming authoritarian and following a wrong course.

The ruling party's electoral setback saw Indian stocks suffer the steepest decline in four years. Rajan said the outcome is good for the country as he thinks this result forces India to pivot to a different path from the one it has been on, which has led to unemployment and economic distress in the country.

"I think this is extraordinarily good news for India over the medium term because it puts checks and balances on a government that was becoming increasingly authoritarian and in a sense following the wrong course," he said.