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India Politics: BJP sweeps Uttar Pradesh and Uttarakhand

  • In the first major state elections post demonetization, BJP, the ruling party at the center, has swept Uttar Pradesh (UP) and Uttarakhand, with a four-fifth majority, an unprecedented victory. BJP's vote share in UP has gone up from 15% in 2012 to 39% in 2017. In Punjab, Congress has come back to power after 10 years with a two-thirds majority. In Goa and Manipur, Congress has emerged as the single largest party, tantalizingly short of the majority mark.
  • Uttar Pradesh is India’s largest and most populous state, sending to the Lok Sabha 80 MPs – the highest among all states, and is crucial from the perspective of Rajya Sabha arithmetic. The magnitude of BJP’s victory in UP has beaten the highest exit poll predictions (285 seats predicted by Chanakya). Post demonetization, BJP has witnessed a series of electoral successes, be it in the assembly bye-elections or various local elections in Maharashtra, Orissa, Gujarat, Rajasthan, and Punjab.
Uttar Pradesh to be ruled by a national party after 15 years
Uttar Pradesh would be governed by a national political party after 15 years. Over 2002-2017, regional parties like Samajwadi Party and Bahujan Samaj Party ruled the state. Also, for the first time in 15 years, UP and the center would have the same ruling party at the helm.

State election results reinforce Mr Modi’s popularity
The just-concluded elections in five states were the most important polls post the 2014 general elections and almost coincided with the half-way mark of Prime Minister, Mr Narendra Modi’s term at the center. A resounding victory with four-fifth majority in India’s largest and politically most crucial state reinforces Mr Modi’s popularity and further weakens the opposition, in our view. Another important trend emerging is the unequivocal and decisive mandate by the electorate, be it general elections or state elections (Bihar, Delhi, Assam, Maharashtra, Haryana, and Jharkhand), bringing down curtains on coalition politics.

Reform momentum should continue; light election calendar ahead
BJP now rules the highest number of states. This should facilitate decision-making pertaining to significant reforms (land, labor, tax), going forward. It would also speed up decision making on strategic policies and enhance the transmission of economic policies in a smoother fashion, in our view. We expect the reform momentum (demonetization, GST, FDI liberalization, direct benefits transfer, financial inclusion, etc) to continue and gather more steam, as this victory should boost the confidence of BJP at the center, especially after an uncertain phase following demonetization. Additionally, the lack of credible opposition at center and in key states should help BJP. Also, the election calendar going forward is light, with the next state elections (Gujarat) almost nine months away. We believe this would ensure complete focus on economics. Implementation of GST remains a key event to watch out for in FY18.