As India braces for the outcome of the high-stakes Assembly elections in Gujarat on Monday, industry body Assocham said corporate India will have to factor in “political realities” weighing on economic decisions of the government, including the last full-fledged Budget for 2018-19, to be tabled in Parliament in a couple of months.

Counting of votes polled in the two-phase Gujarat elections held on December 9 and 14 for all the 182 seats will be taken up on Monday and results will be declared the same day. In all, 68.41 per cent voters exercised their franchise, which was 3 percentage points less than in the 2012 Assembly polls (71.34 per cent).

Inevitably, it would be the popular voters’ sentiment that would be factored by the Centre and the state governments in their policies. Tough reform measures such as flexibilities in labour laws may not find favour with the electorate, so India Inc must tone down its expectations on this front.

However, an important takeaway from the current political-economic environment is that the Goods and Services Tax is expected to be streamlined and rates further rationalised on the lower side. “The GST had not gone down well with the traders, the major political force for political parties and the issue remained in focus during the Gujarat elections.

“Besides, SMEs would also get a boost, starting from the Budget proposals. Their role in creating employment in a shorter span of time is being recognised and the job creation would remain a big concern for the government in the foreground to 2019 general elections.” Going forward, Assocham said it expected a major focus on the rural sector with several initiatives like support to farmers, rural and agri infrastructure.

“Thus, corporate India directly related to the farm economy should stand to gain. The tone would be set in the coming Budget.”

The factors to be particularly watched should be inflation, which is usually the top priority of the government in election years.

“In the trade-off, growth may not get as important a place as inflation and thus, the interest rate scenario looks to be on the upside, rather than downward.”

Monsoons in 2018 would also be a crucial variable for the rural demand while the credit growth is still some time away, as banks and companies keep repairing their balance sheets.

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