So why have the latest state election results been so important for the BJP and the Indian economy that PM Modi, a gifted orator, personally took interest and campaigned hard for the party? State elections determine seat share in the Rajya Sabah (upper house of parliament), where the BJP and its allies currently lack a majority. And hence cannot push through tough reforms. This in a way explains why there have been no "big bang" reforms as yet. It appears that Modi's tactics from now until 2016 are to put a BJP government in as many states as possible so that it may be able to have a majority, even without allies. Then it can pass even the toughest reforms which need legislative clearance. And, in turn, help lift the economy to a higher trajectory and create badly needed jobs. That would also help to win the general elections, next due in 2019.

David Fuller's view

Here is the India Report.

I recommend that anyone with the slightest curiosity regarding India, which is currently a top performing stock market worthy of interest, read every section of Deepak Lalwani’s informative Letter.

Domestically, India’s PM, Narendra Modi, has been focussing on the country’s infrastructure development, while tackling bureaucracy and corruption, so that businesses can operate more efficiently.  Internationally, he has been telling governments and corporations that India is now open for business, and pointing out the benefits of its vast and often highly educated labour force.  Meanwhile, Modi is strengthening his position in state elections so that the government can consolidate its power base and operate more efficiently. 

In addition to the Mumbai SENSEX Index’s strong performance shown above, look at the Bombay Banks Index which has pushed to another new all-time high, within what has been a ranging consolidation phase following the year’s earlier strong gains.    

(See also yesterday’s comment: Modi State Election Wins Pave Way for India Overhaul.)