With the addition of Maharashtra and Haryana States to the BJP kitty, industry expects Prime Minister Narendra Modi to unleash ‘generation next’ reforms.
The Manmohan Singh led UPA-II regime failed to push key economic reforms sought by the international investors as well as the domestic sector due to pressure from UPA partners. For instance, the Trinamool Congress walked out of the UPA in protest against the refusal of the government to roll back the diesel price hike and withdraw the decision to bring in FDI in multi-brand retail.
The proposed labour reforms and the decision of the government last week to liberate diesel from the regulatory mechanism have fuelled hopes that after the victory in Maharashtra and Haryana, the Modi government would have greater freedom in giving a push to economic reforms in sectors such as banking and insurance.
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“Markets are pretty comfortable with the mandate the BJP has got to form governments in Maharashtra and Haryana,” Deven Choksey, Managing Director, K.R. Choksey Shares and Securities, told
“Overall, the mood of the market is positive as the government has put in place a transparent and effective formula for the pricing of oil products,” Mr. Choksey added. Industry believes that victory in a State, which is home to the financial capital of the country, will help Mr. Modi push through his economic reform agenda.
According to Mr. Choksey, India needs uniformity in the policies of the States and the Centre to send the right signal to domestic and global investors. “Having achieved the prime position in Maharashtra, the BJP will explore government formation and a natural ally will be their estranged partner, Shiv Sena,” said Arun Kejriwal, a leading capital market analyst.
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Mr. Choksey said the regime change in Maharashtra was good news for industry since after the political capital of India, BJP would now be in a position to capture even the financial capital. “This would be a morale booster for the Central Government.”
However, further developments in Tamil Nadu and the Supreme Court order to grant bail to former Tamil Nadu Chief Minister J. Jayalalithaa, who was convicted in the disproportionate assets case, also augur well for the BJP, particularly in the Rajya Sabha. Markets believe that, being out of power Ms. Jayalalithaa will move closer to the BJP and support it in the Upper House of Parliament. With the government of Haryana being replaced by the BJP and capital market regulator Securities and Exchange Board of India (SEBI) debarring DLF and its promoters from accessing the capital market, a lot of action is expected. “DLF shares lost 27.34 per cent last week” said Mr. Kejriwal, adding that, “in all probability, the controversial land deal will be re-opened and examined by the new State Government.” This means more problems for the real estate major.
While markets have been volatile, it is widely expected that with growth being a concern in the global market, India would continue to be a favoured destination for foreign institutional investors (FIIs).
On Monday, the rupee closed with eight paise gain in a one-week high of 61.36 against the greenback. The benchmark S&P BSE Sensex flared up by 321.32 points, or 1.23 per cent. Industry chamber Assocham said that BJP success in Haryana and Maharashtra would strengthen the Modi government at the Centre, and give it crucial political support for going ahead with key economic reforms, including the long-pending GST. “Besides, the BJP government in Haryana and its alliance government in Maharashtra will bring in much better co-ordination between the Centre and the States on important but politically difficult issues like labour reforms,” Assocham said in a statement.
“The BJP governments in Rajasthan and Madhya Pradesh are already showing the way in pursuing reforms in labour laws and in ease of doing business. These are crucial for revival of investment and economic growth,” Assocham President Rana Kapoor said.