At the time of writing, the Bharatiya Janata Party (BJP) is the single largest party (104 seats) in Karnataka. But the Congress, lagging way behind (78 seats), seems poised to snatch victory from a massive defeat by going to bed with Janata Dal Secular (JDS). Whether this Congress strategy of keeping the BJP out of power by all means works out or not (a lot depends on what call Governor Vajubhai Vala takes), the fact remains that is has been trounced by the BJP in its last major bastion.
In the short term, Congress might end up doing to BJP in Karnataka what the BJP did to it in Goa and a few other places. But if the Congress is satisfied with this bit of smart realpolitik, it will have not learnt the lessons from this electoral drubbing. The creditable performance of BJP should remind Congress president Rahul Gandhi to work on a strong economic agenda beyond loan waivers and election freebies, if he is serious about 2019 national elections.
So far, Rahul has been focussing on blaming Modi or countering his speeches rather than putting forth his own plan on larger issues. A larger national narrative, whether it is economic or political, is absent. On the economic front, Congress has done little else than repeat allegations about mismanagement. Be it tackling parallel economy or addressing farmer woes, Rahul has, at no point, given us a clear indication of his plan. Even when he pitched himself as a prime ministerial candidate, Rahul failed to present a strong vision.
Now, what does the BJP performance tell investors who are eagerly looking at 2019 general polls for cues on political stability, policy continuity and the course of future reforms? As this writer pointed out in a Firstpost column, Modi has continued his run and has retained his popularity, perhaps with a little less fervour.
Investors will be happy about BJP retaining its momentum. One only need look at the bell-weather equity indices to understand investor sentiment. The benchmark equity index, Sensex, responded positively: Jumping over 400 points in the intra-day trade, and showed markets upbeat on a decisive BJP win.
There are a few major takeaways from the Karnataka polls from an economic perspective: First, the BJP’s alleged economic mismanagement (read demonetisation and Goods and Services Tax), key points of allegation by Opposition parties is an old, is a forgotten story.
Karnataka is not an industry-heavy state like Gujarat. Even as faulty implementation of GST and demonetisation had their cascading impact here, voters chose to ignore those arguments. Interestingly, both were not even major election agenda items even for the BJP as an earlier Firstpost column highlighted.
Second, BJP’s clear win in Gujarat will soothe nerves of investors big time as this adds to the belief of political continuity at the Centre in 2019. Although the outcome of a single state election cannot be treated as an indicator to judge the outcome of national polls, it surely indicates which way the wind is blowing; that the Modi magic is intact and chances are high that Modi will return to the Centre in 2019. This possibility is something foreign analysts such as those in Swiss financial services firm, UBS, have already priced in. Investors will be more confident now to think of putting money on the table for projects that have life beyond 2019.
Third, in his four years in office, Modi has taken up major reform tasks, mainly generating consensus to make Goods and Services Tax a reality. Karnataka should offer confidence to Modi administration to go ahead with the reform agenda and not turn to doling out goodies in the last year of its term.
Fourth, whatever little confidence moneybags would have reposed in Rahul’s Congress would have taken a major hit with the party further losing its grip on the national scene. Rahul proved yet again he is no match for Modi when it comes to guiding the party to election victories. This will leave investors with no option but to back Modi going forward. Rahul paid the price of not having a national narrative beyond blaming Modi.
Updated Date: May 15, 2018 18:16 PM