BJP alliance’s victory in the state will boost market optimism: Ajay Bagga

“What are the implications of the results? First, there is policy continuity for a state with $470 billion GSDP. This is important for India, especially since the state holds the commercial capital of the country. Policy continuity is important,” says Ajay Bagga. . , market expert.

GIFT Nifty has already signaled. Do you think this trend will continue on Monday?

Ajay Bagga: Yes, I think it will. It has an immediate effect, though not very lasting, as we have seen in the case of state elections. However, there is a definite effect in the short term.

What are the implications of the results? First, there is policy continuity for a state with a $470 billion GSDP. This is significant for India, especially since the state houses the commercial capital of the country. Policy continuity is important.

Second, as we saw after the Haryana elections, when early results matched the exit polls indicating a Congress victory, the markets were relatively stable. However, when the result was reversed, markets rallied as the BJP retained Haryana. Similarly, here too, it was expected to be a close contest, but now the BJP alliance looks likely to get a two-thirds majority. Markets will see this positively. However, as I said, this effect is likely to be short-lived.

Third, the results have broader implications for foreign investors. They will interpret this as a sign of political stability at the Centre. Coalition A win in a major state bodes well for the Modi government’s ability to successfully lead a coalition. This increases the credibility of the central government and instills confidence among foreign investors for the next five years.

In terms of election promises, Mahayuti proposed direct cash benefit schemes like Ladki Bahin Yojana. Do such initiatives resonate with voters?

Ajay Bagga: Especially after the COVID-19 pandemic, the K-shaped recovery has put people without assets, jobs or in the unorganized sector at a disadvantage. Safety nets like these are crucial in a country like India, where the bottom 30% of the population appreciates such initiatives.

As Smitaji mentions, these welfare measures have reverberated across states from Madhya Pradesh to Maharashtra and Jharkhand. Exit polls also showed higher participation among women voters, and the ruling regime appeared to enjoy a 3% higher vote share.

Our winner-take-all voting system means that even small differences in vote share can result in significant differences in seats. Women voters probably played a key role, as seen in Madhya Pradesh, where Shivraj Singh Chauhan’s successful safety net initiatives also had an impact. This could be a game-changer between these assembly elections and the next Lok Sabha elections.

BJP has promised 25 lakh jobs in Maharashtra. Given the employment challenges across India, do you think this can be replicated at the central level?

Ajay Bagga: This is a tough job, and no government can realistically create such a large number of jobs directly. We need a model like Argentina’s libertarian approach, where government jobs are reduced. Currently, government spending is already too high. Manifesto promises like job guarantees are more aspirational than actionable.

Job creation has to come from private enterprises. The government’s focus on MSME credit, especially the schemes introduced during Covid-19, is a step in the right direction. States like Maharashtra, Tamil Nadu, Telangana and Andhra Pradesh, which welcome wealth creators, are attracting significant projects.

To put it in perspective, Maharashtra’s GSDP would rank as the 31st largest economy in the world, comparable to countries like Pakistan, Bangladesh or even bigger than New Zealand or Denmark. If Maharashtra’s $500 billion economy grows to $1 trillion in the next three to four years, significant employment can be generated. However, this growth will come from private sector initiatives supported by government policies, not direct government employment.

What is your stand on farmer loan waiver, a common promise of both BJP and Congress? Critics argue that these schemes disrupt fiscal discipline.

Ajay Bagga: Politically, loan waiver is the right way to appeal to voters. However, they harm the credit culture. When one borrower in a village defaults, it often encourages others to follow suit, creating a significant moral hazard.

This has a negative impact on banks. On the one hand, the RBI imposes strict obligations on banks for priority sector lending, including agricultural loans. On the other hand, political parties announce amnesties without addressing the funding mechanism.

There is a real need for reforms in the agriculture sector. Unfortunately, reforms were not communicated effectively, and vested interests in some states derailed the agenda. Addressing root causes through comprehensive reforms and providing farmers access to nationwide markets will be more effective than temporary amnesties.