Uttar Pradesh Elections – A Close Call

Of the five states going to poll, Uttar Pradesh is the most important one given its sheer size. However, the results may be too close to call.

The Bahujan Samajwadi Party (BSP) suffers from incumbency, but Chief Minister Mayawati has tried to overcome it by aggressively churning her candidates. Still, there could be voter fatigue due to corruption allegations.

The Samajwadi Party (SP) has a fresh tailwind with Akhilesh Yadav and does not have the headwind of being an incumbent as it did in 2007. If the results are close, Ajit Singh’s party (currently a Congress ally) could play a prominent role in government formation. Both the Congress and the BJP suffer from lack of local leadership and grassroots presence in the state.

It is quite possible that UP goes to President’s rule if neither of the two regional parties manage to swing a majority (in excess of 203 seats) or a significant seat count (in excess of 150 seats).

If Congress Wins More than 100 Seats in UP – Indeed, a mid-term poll is more likely if the Congress does exceptionally well in the UP polls (wins more than 100 seats – a somewhat unlikely event). Even so, given the cost of fighting elections and the uncertainty of winning, the probability of mid-term polls remains low.

The market is likely to consolidate or even correct in the coming days as it prepares for some big events including the state election results, the budget and the next RBI policy.

2 thoughts on “Uttar Pradesh Elections – A Close Call”

  1. Markets have also partially discounted a ‘positive’ outcome from the state assembly polls, especially Uttar Pradesh, in favour of the UPA. It is banking on the emergence of Samajwadi Party (SP) as the single-largest party but still falling short of simple majority and the emergence of the Congress as the provider of support to the SP to cross the half-way mark. The market believes this sort of arrangement between the Congress and SP at both State and Central level would provide the UPA the much needed flexibility to push through its reform agenda that has been virtually ambushed by the mercurial Trinamool Congress. Any ‘adverse’ outcome other than the one mentioned above leaves the market vulnerable for swings.

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  2. A coalition of SP and Congress would be viewed positively by the market. Even a majority by SP as held in certain quarters may be viewed positively for ushering a stable government in UP. This is followed by a majority by BSP and/or BJP. However a hung assembly is unlikely to provide fresh direction
    to the market.

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