rewrite this title and make it good for SEOBJP alliance’s state win to fuel market optimism: Ajay Bagga

“What are the implications of the results? First, there is continuity in policy for a state with a $470 billion GSDP. This is significant for India, especially since the state houses the country’s commercial capital. Policy continuity is important,” says Ajay Bagga, Market Expert.

GIFT Nifty has already given an indication. Do you think this trend will hold on Monday?

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

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

Second, as we saw after the Haryana elections, when the initial results matched the exit polls indicating a Congress sweep, the markets were relatively stable. However, when the results reversed, with the BJP retaining Haryana, the markets rallied. Similarly, here, it was expected to be a close contest, but a two-thirds majority for the BJP alliance now seems likely. Markets will view this positively. However, as I mentioned, this impact 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 center. A coalition alliance winning a major state reflects well on the Modi government’s ability to lead a coalition successfully. This bolsters the credibility of the central government and instills confidence among foreign investors for the next five years.

Regarding election promises, Mahayuti had proposed direct cash benefit schemes like the Ladki Bahin Yojana. Do such initiatives resonate with voters?

Ajay Bagga: Especially after the COVID-19 pandemic, the K-shaped recovery has left 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 Smita Ji mentioned, these welfare measures have resonated across states—from Madhya Pradesh to Maharashtra and Jharkhand. Exit polls also indicated higher participation among women voters, and the ruling dispensation appeared to enjoy a 3% higher vote share.Our winner-take-all voting system means that even a small difference in vote share can result in a significant difference in seats. Women voters likely played a pivotal role, as seen in Madhya Pradesh, where Shivraj Singh Chouhan’s successful safety net initiatives also made an impact. This might have been a game-changer between these assembly elections and the upcoming Lok Sabha elections.

The 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: It’s a tough task, and no government can realistically create such a large number of jobs directly. What we need is a model like Argentina’s libertarian approach, where government jobs are reduced. Currently, government expenditure is already too high. Manifesto promises like job guarantees are more aspirational than actionable.

Job creation will have to come from private enterprises. The government’s focus on MSME credit, especially 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 into perspective, Maharashtra’s GSDP would rank as the 31st largest economy in the world, comparable to countries like Pakistan, Bangladesh, or even larger than New Zealand or Denmark. If Maharashtra’s $500 billion economy grows to $1 trillion in the next three to four years, substantial employment can be generated. However, this growth will stem from private sector initiatives supported by government policies, not direct government employment.

What’s your take on farm loan waivers, a common promise by both the BJP and Congress? Critics argue these schemes disrupt financial discipline.

Ajay Bagga: Politically, loan waivers are an expedient 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 debilitating effect on banks. On one hand, the RBI imposes stringent obligations on banks for priority sector lending, including farm loans. On the other hand, political parties announce waivers without addressing the funding mechanism.

What’s truly needed is farm sector reform. Unfortunately, the reforms were not communicated effectively, and vested interests in a few states derailed the agenda. Addressing the root causes through comprehensive reforms and providing farmers access to a nationwide market would be more impactful than temporary waivers.