Three out of five States that went to polls have given a decisive mandate against the Congress, the party that leads the scam-scarred UPA Government at the Centre.
With the final tally yet to be announced, the Samajwadi Party romped to victory in India's largest State, Uttar Pradesh, defeating the incumbent, the Bahujan Samaj Party, led by Ms Mayawati. The Bharatiya Janata Party and Congress came a dismal third and fourth, respectively.
Termed as the ‘semi-final' to the 2014 Lok Sabha elections, the UP polls were seen as a test case for Mr Rahul Gandhi's leadership acumen. Reacting to the results, Mr Gandhi owned responsibility for his party's dismal performance and termed it as a “very good lesson” for him. He admitted that the “fundamentals of the Congress in UP were weak and needed to be corrected”.
Significantly, the Congress even failed to wrest the traditional Gandhi family seats in Amethi and Rae Bareli — the Lok Sabha constituencies respectively of Mr Gandhi and the Congress President, Ms Sonia Gandhi.
REFORMS & BUDGET
The electoral debacle for the Congress may impact second generation reforms, fear political observers. This may well start with the General Budget to be tabled on March 16. Sources say that while the possibility of re-writing the Budget is very low, some tweaking cannot be ruled out. The poll results also have the potential to discourage fiscal consolidation, as the UPA Government may now find it tougher to raise excise duty and service tax.
According to a source, the Finance Minister may not include FDI in multi-brand retail in his Budget speech, as the SP has objections to it and the TMC has already voiced its opposition.
The Food Security Bill could also take a hit. Already there are indications that the Finance Minister may provide a token amount in the Budget and further allocations could be met through supplementary demand for grants. Now, the Centre could go slow on that, too. Some Chief Ministers have already raised their voice against the move.
On the political side too, observers expect the Assembly poll outcome to lead to some re-alignment at the Centre, with the Samajwadi Party, now an outside supporter, gaining political muscle and relations with hot-and-cold allies — the Trinamool Congress and the DMK — set to change.
UP-LINKED STOCKS DIP
In Mumbai, shares of companies with significant business exposure to Uttar Pradesh lost value on Tuesday on account of profit booking, as the State was all set to see a regime change. A large number of projects are awaiting clearance in the State. The market, however, expected sugar and power companies to benefit from a change of guard in UP.
Sugar millers, reeling under the burden of huge cane arrears due to a sharp increase in the State-advised price for cane during Ms Mayawati's regime, will now look forward to reforms in cane pricing and some kind of a financial package.
Some analysts, however, said that a weaker-than-expected performance from the Congress could lead to populist measures at the Centre that could slow reforms.
Beyond UP, too, the Congress fared poorly. If in Punjab, the Shiromani Akali Dal-BJP combine was voted back to power, in Goa, the BJP-Maharashtrawadi Gomantak Party combine defeated the ruling Congress-Nationalist Congress Party alliance.
The only solace for the Congress came from Manipur, where it retained power and, to some extent, in Uttarakhand, where it was neck-and-neck with the incumbent BJP.
(with inputs from Shishir Sinha, Vishwanath Kulkarni and agencies)