Political tide turns in favour of India's business sector

The recently held state elections in India could bode well for the passage of economic reforms in India, according to analysts.

Results of five state elections – Kerala, Assam, Pondicherry, West Bengal and Tamil Nadu – were announced on Thursday.

“Regional parties have dominated the state elections held over the past month, but there has also been an apparent strengthening of support for the prime minister Narendra Modi’s Bharatiya Janata Party (BJP) at the local level,” says Shilan Shah, the India economist at Capital Economics. “The results should help at the margin to ease the passage of economic reforms at the national level.”

The BJP won the election in Assam, meaning that it now has nine out of 29 states in India under its control. Although the BJP did not win in Kerala and West Bengal, it did improve its position in those states.

The opposition Congress party, meanwhile, lost in Assam and Kerala, meaning that it only has governments in six states.

Opposition in the different states to policies proposed at a central government level in India often threatens to derail much-needed reforms, so having a wider network of support is vital for the BJP as it tries to move ahead with key reforms, including the goods and services tax and land acquisition laws.

“The strengthening of support for the BJP at local level should make it easier for policies at the national level to filter into individual states,” says Mr Shah. “What’s more, the state election results should help at the margin to ease the passage of economic reforms at the national level, as members of the Rajya Sabha (upper house of parliament) are elected by state assemblies.”

But the BJP still remains short of a majority in the upper house, or Rajya Sabha, which could be a stumbling block.

“The results of the state elections will not fully solve the problems that the BJP has faced in the Rajya Sabha,” says Mr Shah. “But its representation is nevertheless likely to increase. The presence of regional parties, which should be easier to broker deals with than the obstructive Congress party, also looks set to rise. The upshot is that the outlook for economic reforms has brightened a touch.”


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