MUMBAI: Sweeping election wins in three Hindi heartland states are expected to give India’s ruling Hindu nationalists renewed strength to put faltering economic reforms back on track and silence critics.
The wins, defying opinion polls and dealing a tough blow to the opposition Congress party, also make a populist budget packed with economic sweeteners less likely ahead of next year’s national elections, financial analysts say.
A change in campaign tactics probably helped the Bharatiya Janata Party (BJP) clinch victory .
With the economy booming and bountiful monsoon rains bringing wealth to the countryside, the BJP focused more on maintaining the economic feel-good factor rather than whipping up religious sentiment, a tactic that brought it to power in the 1990s.
“Economic reforms now have a popular sanction behind them,” Commerce Minister Arun Jaitley told reporters.
“It is the hard reality of economics that is driving the political system. These elections have shown that governance and issues which touch the lives of people such as water, power, roads and connectivity can be decisive.”
The BJP easily won the three most critical of four state polls this week. Before Monday’s elections, Congress controlled all four.
With Asia’s third-largest economy on the edge of what Finance Minister Jaswant Singh calls “explosive growth”, Prime Minister Atal Behari Vajpayee has been struggling to push through reforms to cut the deficit and kick-start stalled privatizations.
ECONOMY:Fuelled by bumper harvests and the lowest interest rates in 30 years, India’s economy is expected to grow more than seven per cent this year, compared with last year’s 4.3 per cent. Analysts say aggressive reforms could take growth to 10 per cent.
“I do assert India is shining. GDP growth will continue to make you feel good,” Finance Minister Jaswant Singh told reporters.
Singh said the victory in state elections for his party would further bolster the country’s economic reforms and his ministry would focus on agriculture in the coming months to boost growth.
“We will get the investments. The finance ministry will do everything to see that money is not a constraint in the development of the country,” said Singh.
The BJP, which leads a large and unwieldy coalition government, has stressed its reforms must go through if growth is to be sustained and create much-needed jobs in the world’s second-most populous country.
Its strong victories in Madhya Pradesh, Rajasthan and Chhattisgarh — Congress kept only Delhi — will strengthen its hand with coalition allies ahead of the general election.
“On balance, the results will make the government more confident about its economic policy reforms,” Singapore-based V. Anantha Nageswaran, regional head of investment consulting at Credit Suisse Financial Services said.
The government’s $3 billion privatization programme has run into strong opposition from factions within the BJP and a slew of court challenges by India’s powerful public sector trade unions.
Such opposition has put on hold the sale of Hindustan Petroleum Corp Ltd, worth $2 billion alone, as well as Bharat Petroleum Corporation Ltd, which together control 40 per cent of India’s $15 billion a year oil products market.
With Vajpayee publicly committed to seeing out his full-term to October, this week’s electoral gains are also seen as reducing the temptation to resort to a populist budget in February.
“After this result, the calls for a populist budget will ease and any overt measures to woo voters are unlikely,” said Kishlaya Pathak, Standard Chartered Bank economist.—Reuters
