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Reforms easier with Modi's big win in states: Moody's

March 15, 2017 14:06 IST

The Bharatiya Janata Party’s thumping victory in Uttar Pradesh and substantial gains made in other states will facilitate reforms as the ruling party inches closer to a majority in Upper House, Moody's Investors Service said on Wednesday.

"The 2017 state election results in India demonstrate broad-based popular support for the Indian government's policy agenda and will facilitate the implementation of further reforms, a credit positive for the sovereign," it said in a statement.

While the ruling NDA has an absolute majority in the Lok Sabha, it currently does not have a majority in the Rajya Sabha.

"...the party will increase its share of seats in the Upper House (Rajya Sabha) of India's Parliament," Moody’s said.

However, the changes will not be immediate, Moody's said.

"The ruling party will not feel the benefit of electoral gains immediately, because the changes in the upper house will only occur next year, when some members retire," says William Foster, Moody's vice president and senior credit officer.

"Nevertheless, electoral support at the state level should translate into broader support for government policy in the upper house, facilitating the passage and implementation of additional reforms," Foster added.

In its report, 'Government of India: State Elections Demonstrate Broad Support for Reform Agenda, a Credit Positive', Moody's said the BJP has won " solid gains despite the negative economic hit from demonetisation in late 2016."

In 2018, 69 seats in Rajya Sabha, including 10 from UP and one from Uttarakhand, will come up for re-election.

"If the BJP-led coalition increases its seat tally to or close to an outright majority, passage of policies will become easier, helping to accelerate reform," it said.

Also, collaboration between the central government and the new BJP-led states could improve, partially circumventing impediments to reform at the federal level on politically sensitive issues like land and labour reforms.

BJP-led states like Gujarat and Rajasthan have already amended some land and labour laws.

In UP, BJP secured 312 of the 403 state legislative assembly seats, up from just 47 in 2012.

Unlike rival parties in UP, the BJP did not nominate a local chief ministerial candidate but focused on the leadership of Modi himself.

"The BJP's success reflects strong popular support for Prime Minister Narendra Modi and his national policy agenda.

“By contrast, the 2012 UP election outcome reflected popular support for individuals in the Samajwadi Party and Bahujan Samaj Party," Moody's said.

In addition to UP, the BJP also took majority of the seats in Uttarakhand, apart from forming the government in Goa and Manipur.

Currently, the NDA government, led by the BJP, holds about 30 per cent of the total seats in Rajya Sabha.

"Therefore, the ruling party will continue to rely on alliances with representatives of other parties to push through policy measures," Moody’s said.

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