The state election victories for Prime Minister Modi’s BJP in both Gujarat and Himachal Pradesh ensure that the ruling party remains firmly on track to secure a majority in the Rajya Sabha (upper house of parliament) in the not-too-distant future. They should also provide some reassurance to the government that its popularity has not been dented by demonetisation and the implementation of the GST. In turn, that might make Mr Modi more inclined to pursue reforms in future. He has shown no inclination towards shaking up land acquisition or labour market policies, and isn’t likely to do so over the coming months as the general election in 2019 comes onto the horizon. However, we think that the BJP’s latest victories will open the door for other, less politically-contentious measures, including loosening restrictions on foreign direct investment and moves towards privatisation in various sectors of the economy.
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