Modi's weaker-than-expected election win raises questions over his economic and political agenda

The election outcome in India has turned out to be a huge political blow for Prime Minister Narendra Modi and his ruling party, and has significant implications on how he intends to govern the country, observers say.  

Modi did not get the landslide victory that was widely predicted by exit polls ahead of results. Instead, he will enter his third term with a much-weaker mandate than initially anticipated.

His Bharatiya Janata Party lost dozens of seats bringing its projected total down to 240 — falling short of an outright majority in the country's lower house of parliament.

It was a marked difference from the sweeping mandates of 2014 and 2019, when the BJP garnered 282 and 303 seats respectively, achieving a majority on its own.

Modi projected a brave front, touting his electoral win as "the first time post 1962 that an incumbent government has emerged victorious for the 3rd time," during a speech at the BJP headquarters in New Delhi on Tuesday. 

He added that it will be "a new 'Golden Chapter' in India's development."

But the outcome is more complicated for Modi, who will be forced to rely on coalition partners for the first time in his decade-long rule — and some of them may not share his economic or political agenda for the country.

"We are in an unknown territory," said Neelanjan Sircar, a senior fellow at the Centre for Policy Research in New Delhi on Wednesday.

"We've never seen a Modi government have to act in a coalition. We know that the party has been engaged in decisive action, in centralization," Sircar told CNBC's "Squawk Box Asia."

"Can they adjust in the ways that a party needs to and a leader needs to when you're leading a coalition?" he said, adding Modi will likely have an "uneasy relationship" with its