DBS Group Research economist Radhika Rao analyses recent Indian state election results, highlighting the BJP’s (Bharatiya Janata Party) historic gains in West Bengal and a third-term win in Assam, alongside shifts in Tamil Nadu and Kerala. She notes implications for welfare-heavy state budgets, fiscal deficits, and sectors such as railways and infrastructure, while also assessing risks to Indian assets from Brent, El Nino and bond yields.

Elections, fiscal risks and market impact

"State elections in West Bengal, Tamil Nadu, Kerala, Assam, and Puducherry sprang a few surprises."

"This marks an expansion in the ruling party’s reach beyond its traditional strongholds, expanding its pan-India presence and strengthening its position."

"State budgets have witnessed a sharp rise in welfare and populist spending in recent years, structurally lifting deficit ratios past 3% of GDP threshold in FY26 and likely FY27, also reflected in widening SDL [State Development Loans] spreads."

"A host of populist promises were also made in the run-up to these polls, which will add to the potential fiscal strain this year."

"Sectors like railways, infra, defence spending, industrial electrification, ports, and manufacturing are expected to benefit from this shift."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)