NEW DELHI— In India, stock markets and businesses are upbeat following a solid win for the opposition in a recent round of state elections. Domestic investors hope these victories will propel the Bharatiya Janata Party, seen as more business friendly, into power in national elections to be held by May next year.
The opposition Bharatiya Janata Party’s victories in four key state elections prompted stock markets to rise to a record high earlier this week before losing some momentum by Friday.
Analysts say businesses are cheered by the prospect that national elections next year may replicate what happened in the state polls, dislodging the Congress party-led coalition government and propelling the BJP to power.
Frustration has been growing with the government, which has been embroiled in massive corruption scandals and has failed to stem the decline in an economy which has slipped to its slowest pace in a decade.
The chief economist at Anand Rathi Financial Services in Mumbai, Sujoy Hajra, says there is some level of optimism in India’s financial capital about the prospect of a change.
“It’s a pro development, pro-action kind of verdict. It’s also being perceived that there has been a prolonged policy paralysis at the center, so a change of regime can actually kick stir the economy, that’s the kind of expectation," Hajra said. "What businesses are expecting, there should be some push for big ticket reforms. Also there should be accountability, there should be reduction of corruption.”
The BJP has announced that the Chief Minister of western Gujarat state, Narendra Modi, will be its prime ministerial candidate.
He is seen as a decisive leader and has been praised by business leaders for creating an investment friendly environment in his state. Industries have flocked to set up factories in Gujarat state which promises quick clearances in a country notorious for its red tape.
Chief economist at ICICI Securities, A. Prasanna, said many investors perceive the BJP as a party that will deliver change and stem the drift in governance.
“The last time they were in government between 98 and 2004, they were seen as more pro reforms and more pro investment. And of course their track record in the states they are ruling, and I would not just point out Gujarat, the impression is that they are more pro-business,” said Prasanna.
However, political analysts warn that next year’s elections may not deliver the decisive verdict that businesses are hoping for. Although the BJP has a strong presence in north India, it is much weaker in southern and eastern India. A new party born on an anti corruption plank also put up a good showing in Delhi’s state polls, raising fears that it may cut into the vote share which the BJP is hoping to get in national elections and lead to an inconclusive result.