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Modi Set to Retain Grip on Home State After Bellwether Vote

Indian Prime Minister Narendra Modi’s party is set to return to power in his home state.

Modi Set to Retain Grip on Home State After Bellwether Vote
Ahmedabad: Prime Minister Narendra Modi addresses an election campaign rally, at Dhandhuka village of Ahmedabad district on Wednesday. (Source: PTI)

(Bloomberg) -- Indian Prime Minister Narendra Modi’s party is set to return to power in his home state, an election that’s considered a bellwether before the national vote in early 2019.

The Bharatiya Janata Party had won or was leading in 99 seats in the 182-seat Gujarat legislature as of 3:40 p.m. local time, according to the Election Commission of India. That’s more than the 92 needed for a majority though this would be the BJP’s lowest tally in more than two decades. The main opposition Congress party had won or was ahead in 77 seats.

The results "indicate a strong support for politics of good governance and development," Modi wrote on Twitter.

Modi Set to Retain Grip on Home State After Bellwether Vote

A narrower victory may prompt Modi to resort to populist spending to boost support before he faces re-election in early 2019. That risks widening India’s already bloated budget deficit and pressure the battered bond market. The result could also embolden Congress leader Rahul Gandhi, who tapped into discontent against Modi’s economic policies before as many as eight state elections over the next year.

"BJP will have to take some corrective measures in terms of the discontent on the ground but I don’t know how far they will succeed in that," said Sudha Pai, who taught political studies at Jawaharlal Nehru University in New Delhi. These include the creation of jobs for the youth as well as better incomes for farmers, she said.

Modi Set to Retain Grip on Home State After Bellwether Vote

The BJP has held Gujarat for about two decades with Modi at the helm for more than 12 years. He used his stewardship of Gujarat as a launchpad for his national campaign in 2014, pledging business-friendly policies and development for all. However, last year’s ban on high-value currency notes and this year’s chaotic roll out of the goods and services tax has hit traders and textile workers in Gujarat.

The Congress party, which had been written off earlier in the year, found its voice and attacked the administration as a "government for the rich."

Modi Set to Retain Grip on Home State After Bellwether Vote

"A few months ago, the market believed that the state election in Gujarat was a non-event with a foregone conclusion," analysts at CLSA led by Mumbai-based Mahesh Nandurkar wrote in a report on Thursday. "But the changes in the political scenario over the last few months have turned the election into an event."

India’s main stock index -- which had slumped as much as 2.6 percent earlier Monday while Modi’s party was trailing -- recovered to gain 0.4 percent as it became clearer that the BJP would win a majority.

The BJP also seemed poised to wrest the small Himalayan state of Himachal Pradesh from the Congress, according to the Election Commission’s early trends.

--With assistance from Iain Marlow Unni Krishnan and Candice Zachariahs

To contact the reporters on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net, Vrishti Beniwal in New Delhi at vbeniwal1@bloomberg.net.

To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Jeanette Rodrigues, Arijit Ghosh

©2017 Bloomberg L.P.