(Bloomberg) -- Prime Minister Narendra Modi has swept to victory in a key state election with a resounding win that will allow his Bharatiya Janata Party to push forward with its economic reform agenda and enter the national polls in 2019 as favorites.
Modi’s BJP has won 227 seats in Uttar Pradesh’s 403-member assembly, according to the Election Commission of India, beating the incumbent Samajwadi Party and its coalition ally, the Congress Party, in the most politically important of five elections being called today. It is also leading in 82 other seats.
Supporters of the BJP celebrate elections results on March 11.
Modi tweeted that he was "overjoyed that BJP has received unprecedented support from all sections of society".
The BJP is also set to form a government in the state of Uttarakhand, while a ruling alliance of the BJP and another regional party were ousted from power in the agricultural state of Punjab. Ballot counting continued in Goa and Manipur.
Analysts suggested a BJP victory in Uttar Pradesh, which has a population of 204 million people, would be a vote of confidence in Modi’s national leadership as well as his controversial move to invalidate 86 percent of India’s currency.
It is also a sign that Modi’s opposition, particularly the rival Congress Party, continues to be in disarray since the BJP came to power in the 2014 general elections with the largest majority in three decades.
"This enhances his political capital," said Ashok Malik, a distinguished fellow at the New Delhi-based Observer Research Foundation think-tank. "It means he has that much policy room in the run-up to his re-election campaign in 2019."
Opposition in Disarray
The defeat of opposition parties in Uttar Pradesh and other states will reduce their ability to block Modi’s reform measures in the upper house of parliament, where members are chosen based on state election results. While the composition of Rajya Sabha will not change immediately, the long-term trend favors the BJP.
"It will give him more support in terms of his future economic reform agenda," said Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight. "But the fundamental problem the BJP will continue to face until the end of their term is that they don’t have a majority in the upper house."
Exit polls released in the past week suggested a large BJP victory was possible. Even so, the scale of his victory was stark in a state that has long been divided along religious and caste lines. It is also a repudiation of political foes who assumed that Modi’s disruptive Nov. 8 move to remove high denomination notes would be politically unpopular.
"The BJP’s competitors may have banked too heavily on the idea that the demonetization policy was unpopular and that people would vote against it," said Michael Kugelman, senior associate for South Asia at the Washington-based Woodrow Wilson Center. The BJP victory will "telegraph a powerful message from the electorate that it still trusts the government’s ability to get things done," he added.
Business Friendly States
States under BJP control have tended to adopt business-friendly policies at a faster rate than states led by other parties, according to Richard Rossow, the Wadhwani chair in U.S. India policy studies at the Center for Strategic and International Studies in Washington, D.C.
"BJP-led states have been among the most reform-oriented in recent years," Rossow said. "Particularly Rajasthan, Haryana, Gujarat, and Maharashtra. Similar reform orientation in a growing number of states will help India’s overall development agenda."
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