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Gujarat Elections: A test for 2019?

Dec 15, 2017(11:01)
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Would the on-going election in Gujarat be a game-changer for the government at the centre? If BJP does not come into power in Gujarat, would it impact the markets? These are some of the mind-boggling questions of most of the market participants. The election outcome is in the womb of the future and the fate of which will be decided on 18th of December, 2017.

The elections hold pretty high stakes for BJP, as it is the home state of our Honourable PM Shri Narendra Modi. This election is also viewed as a litmus test of Modi led government for the elections in 2019. The voters in the state are divided, whether to favour the incumbency factor or rather chose a new government. There are several factors which may play a pivotal role in the ongoing elections. Lets analyse those factors one by one.

The market participants want BJP to rule the state, as they want political stability in the country. There is also an impression that the future government policies might depend on the results of the on-going elections.  Moreover, 8 states are going for elections in the year 2018, out of which 3 are ruled by BJP namely Chhattisgarh, Rajasthan and Madhya Pradesh. BJP is an incumbent party in these states, thus to reduce the volatility in the political frame, BJP needs to win the Gujarat election.

One of the most influential communities in Gujarat, Patidars, claims that whichever party they have supported so far have won the elections. When Congress went with the KHAM theory propounded by Madhavsinh Solanki in 1980s, Patidars didnt find a place in it and voted the next best alternative, i.e. BJP, as a result of which BJP came in power and ruled Gujarat for 22 years. Currently, Patidars are essentially fighting for reservation in government jobs. However, this has caused an internal conflict in Patidars. Rural areas population agrees with the reservation demand, which is not a major concern for the business class urban population, who are satisfied with the current state. In this regard, senior leaders of Patidar community and BJP met and agreed on a few demands.

Demonetisation and GST implementation have spread agitation amongst the traders community, especially in areas like Vadodra and Surat. Some traders are finding it difficult to sell their products, basic problem being that customers unwillingness to pay the extra tax amount. The community is also not happy with the lengthy procedure of filing GST. On this front, a traders representative met the current government and has put forth a list of demands, of which several demands have been met.

Looking at the amount of hard work BJP is putting up for the election this time indicates that BJPs wants to win with a huge majority. Considering the worst scenario, if BJP does not come into power, there are chances of the opposition parties uniting against BJP causing a political impediment for the BJP in 2019 general elections. This can also create a hurdle for the ongoing economic reforms, as the government in the upcoming years might produce a populist budget.

Considering the better scenario, if BJP has a landslide victory, it will definitely boost the sentiment and in turn may encourage the government to speed up the process of ongoing economic reforms, further improving the chances of winning the 2019 general elections. 


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