Delhi: With the Election Commission (EC) calling elections in Gujarat, analysts believe political considerations are likely to play a more dominant role in driving economic decisions. Markets at current levels, though are pricing in a BJP victory to some extent, they are likely to trade sideways till the final outcome is known.
Between now and the general elections (likely in May 2019) there are 12 assembly polls, which analysts say, in a way will also be interpreted as a referendum on the Modi-led government’s two key reforms – the note ban drive and goods and services tax (GST) implementation.
Of the states, the focus will be on Gujarat (Dec 2017), Karnataka (April 2018), Madhya Pradesh (MP) (Dec 2018) and Rajasthan (Dec 2018). Reports also suggest that the EC could hold elections for states that are scheduled to hold assembly elections between end-2018 and mid-2019 simultaneous with the centre 2019 general election.
“Once the results of this election are out, the anticipation for the outcome of 2019 Lok Sabha election would be quite near. Secondly, Gujarat being the home state of the PM Modi, his popularity in the home state would be taken as a significant sample for his popularity at all-India level,” says G. Chokkalingam, founder & managing director, Equinomics Research.
“Big-ticket reforms are behind us and we expect incremental reforms to focus on execution of already announced measures – the banking sector, strategic stake sales, infrastructure spending and privatisation. We also expect the government to pause on fiscal consolidation in FY18. We do not expect the government to throw caution to the wind, but we do expect some shades of populism to emerge over the next year,” says Sonal Varma, managing director and chief India economist at Nomura.
Though most analysts expect Narendra Modi-led Bharatiya Janata Party (BJP) to emerge victorious in Gujarat, a loss, they say, could impact the market sentiment, as the political stability and the present government’s thrust on the economic reforms are the basis for anticipation of long-term bull-run in the markets.