It’s been a good weekend for India’s Prime Minister Narendra Modi.

Two days ago he took his biggest step yet toward boosting the economy with a shift to more market-based energy pricing. Then yesterday his Bharatiya Janata Party came first in two state elections, building on his landslide victory in May.

Modi now has a stronger hand to push ahead with tougher steps to overhaul Asia’s third-biggest economy. Those include passing a goods-and-services tax, further opening up to foreign investment and making subsidies for fertilizer, cooking gas and food more targeted toward the poor.

“The decision to scrap fuel subsidies and raise gas prices is a potential game-changer in the realm of investor perceptions of Mr. Modi’s commitment to undertake major fiscal and structural reforms,” Nicholas Spiro, managing director of London-based Spiro Sovereign Strategy, said by e-mail. “The stronger the BJP is at the state level, the more scope there is for Mr. Modi to undertake meaningful reforms. Now the stars seem to be aligning for Mr. Modi.”

Thus the victories could make it easier to push through a six-year-old bill proposing to allow foreign investors ownership of as much as 49 percent of a local insurance company and also reach agreements to replace more than a dozen types of tax that increase incentives for corruption. Passing the tax law would require votes in both houses of parliament, plus the support of 15 of the 29 states to amend the constitution.

Formation of a single internal market offers the $1.9 trillion economy a significant boost, according to the National Council of Applied Economic Research in New Delhi.

“The prospects are very good of Modi being able to carry out other tough reforms,”Akshay Mathur, head of research at Mumbai-based Gateway House, said by phone. “GST requires a certain consensus and given his leadership and the kind of euphoria over his victory, chances are that he will push the GST through.”

The optimism follows on the heels of Modi’s Oct. 18 move to scrap controls on diesel prices and increase natural gas tariffs. These were his biggest steps toward curbing subsidies that have contributed to one of Asia’s widest budget deficits.

David Fuller's view

For a country previously considered to be ungovernable, two elections have created one of the world’s strongest democracies, led by an economically savvy Prime Minister who inspires confidence, not least among ex-pat Indians living all over the world.

Here is an informative, short Audio from Bloomberg on the latest election results. 

India’s CNX Nifty Index of 50 large companies representing 24 sectors of the economy is one of the best performing indices this year, up 26.54%, according to Bloomberg.  I am in for the long haul, at least while Narendra Modi is prime minister.  There are a number of Indian investment trusts in the Chart Library.  I currently hold the JPMorgan Indian Investment Trust (JII LN), which presently trades at a discount to NAV of nearly 12%.  It was also held back by Sterling’s strength against the Rupee before Modi was elected.  At some stage I may switch to the smaller New India Investment Trust (NII LN) which is run by Aberdeen.  It is clearly the better performer and trades at a discount to NAV of 10.23%.