State election victories for Indian president Narendra Modi’s Bharatiya Janata Party (BJP) have cemented the prospects of an economic overhaul, experts have claimed.
Mr Modi saw his party sweep to victory in Maharashtra, which is where the country’s financial capital, Mumbai, is based, and in Haryana, in northern India.
Avinash Vazirani, manager of the Jupiter India fund, said the Indian population had enjoyed a “rare treat” given the recent election victories, which had put an end to the “endless bickering and paralysis” caused by the lack of a majority government.
“For the investment community, there is the added bonus that Indians have elected the first business-friendly, centre-right government with an outright majority since independence in 1947,” he added.
Mr Vazirani said Mr Modi had been able to take “decisive action” thanks to the control his party has.
“He has rightly identified that India’s weakness is not the absence of reform, but the absence of execution, with far too many projects caught up in India’s labyrinthine and bloated bureaucracy,” he said. “Measures to improve approval processes have seen 176 projects cleared so far, worth $104bn (£64.8bn) out of a total of $376bn that has been taken up for consideration – a boon for the Indian economy.”
Arvind Chari, investment adviser to ACPI Investment Managers, said the results were “good news for India”.
“They indicate that the ‘Modi wave’ is getting bigger and bigger, with the BJP party emerging as the single-largest party across the country,” he said.
“The BJP’s mantra of good governance and development is connecting well with the youth, which is helping to move the political discourse away from caste and religion which has dominated Indian politics for many years.”
Mr Chari added with the major state elections now out of the way, Mr Modi’s party had until the end of 2015 to continue its programme of reforms and implementation “unimpeded by electioneering”.
“The three big reforms currently in progress are deregulation of diesel, direct cash transfers and gas price hikes,” he said.
“These ideas will give the markets some of the ‘big bang’ reforms they were looking for.”
Jan Dehn, head of research at Ashmore, said the government had recently exploited the fall in global energy prices to remove controls on diesel prices.
“Diesel accounts for more than half of India’s fuel demand,” he said.
“The measure not only saves the government money, but also lowers prices and increases economic efficiency.
“The announcement that diesel prices are to be liberalised follows benign consumer price inflation in September, which saw inflation drop to 6.46 per cent year-on-year, from 7.73 per cent in August.”
Neptune’s India fund manager, Kunal Desai, said the BJP state elections were “seen by many as a referendum on the progress of the Modi administration”.
“In the state of Maharashtra, which is India’s largest state in terms of output with Mumbai as its capital, the BJP emerged as the single-largest party and will form the next state government,” he said.
“Meanwhile, in the state of Haryana, with a population greater than Australia, the BJP won a convincing majority, with 47 seats out of 90.”
Mr Desai said these wins were important as they would increase the government’s showing in the Upper House, something which is important to “accelerate constitutional reform”.
“Furthermore, while the central government can enact policy change, much responsibility lies with the state governments in terms of its execution,” he said.
“By having more and more BJP-led state governments in tow, the combination of a co-ordinated central and state government pushing for reform together will be formidable.”
