India's Modi seeks state election wins to support reform agenda

MUMBAI - Prime Minister Narendra Modi spearheaded his party's campaign for elections later this week in Maharashtra state, knowing that victory in the home of India's financial hub Mumbai will make it easier to push through economic reforms.

The smaller northern state of Haryana also votes on Wednesday. But it is the western state of Maharashtra that will provide the best test of how well Modi's appeal is holding up, five months after he stormed to power in a general election with promises to mend a country battered by corruption scandals, high inflation, and sharply slowing growth.

Modi has campaigned personally in Maharashtra, betting he can help his Bharatiya Janata Party (BJP) win big in a state with a population of 110 million spread across an area the size of Italy.

Local polls predict the BJP will win, but perhaps only with a narrow margin. Newspaper Mail Today's survey showed the party is close to gaining the 145 seats needed to clinch a majority in the 288-member state assembly. Maharashtra, along with Haryana, announces results on Oct. 19.

The BJP surprised analysts by breaking off a decades-old alliance with Shiv Sena, a right-wing regional party popular among the region's Marathi people that is now expected to provide formidable competition.

The opposition Congress party, which has ruled Maharashtra with an ally for 15 years, faces defeat on the same anti-incumbency wave that toppled it from power in the general election but retains pockets of support in the state.

Modi is making two dozen campaign stops across the state, and his gift for working a crowd was on full display at a rally in Mumbai on Thursday. "Unless Mumbai and Maharashtra progresses, the country won't move forward. You have wasted 15 years - please don't waste any more time," he said as the crowd chanted his name.

Hopes that Modi would revive an economy that for two consecutive years has grown under 5 per cent - a rate too slow for a country with India's demographics - have spurred a record-setting rally in shares and attracted $34 billion worth of foreign funds in markets this year.

But Modi has so far unveiled none of the "big bang" reforms needed to revive the stagnating economy, focusing instead on small initiatives to reform governance.

Some of the major expected reforms, especially a reduction of price controls in diesel, could prove unpopular. Others such as changes in goods and services taxes or the government's right to acquire land faces strong opposition from some states.

A big win in Maharashtra could make it easier to forge ahead on reforms in the run-up to the annual budget next February. "Modi will have more space to undertake bolder reforms if his party receives a strong political mandate at state level,"said Rupa Rege Nitsure, chief economist of Bank of Baroda in Mumbai.

GOING IT ALONE

Maharashtra will also provide the BJP a testing ground for its go-it-alone strategy for future state elections, given the need to narrow the lead held by Congress and its allies in the upper house of parliament.

State elections allot seats to the Rajya Sabha, where the BJP and its allies control 56 seats, behind the opposition Congress alliance's 90 seats. Although less powerful than the lower house, the Lok Sabha, the body still plays a critical role in passing legislation.

"This is a carefully thought-out strategy," said Girish Kuber, editor of Marathi daily Loksatta and a political analyst.

"Earlier, they didn't have the legs to make it on their own in states where regional allies are strong, but given Modi's pan-Indian appeal, it seems that they will succeed."