Country headed for coalition government, but Modi's farm income scheme could spring surprise: Brokerages
New Delhi, Feb 21 : The country may be heading towards a coalition government after the upcoming general election if reports prepared by different foreign brokerage firms are to be believed.
A day after a CLSA said that BJP will find it difficult to replicate its 2014 success in country's most populous state Uttar Pradesh, a Fitch Solutions Macro Research report on Thursday said that a coalition government seemed most likely at the Centre with good chances even for Congress for steering such a government.
But all is not lost for the Modi government that may very well make a comeback on the back of voter support from rural India. In a separate report, UBS said the guaranteed income for the small farmers announced in this year's Budget may help sway rural voters, helping BJP to have a better chance.
The political combination forming ahead of 2019 general elections is throwing up new possibilities each day. The coming together of BSP-SP in UP has indicated that going will not be easy for the ruling BJP that won 73 out of 80 Lok Sabha seats in 2014 elections.
Prime Minister Narendra Modi will find it difficult to win a complete majority in India's upcoming general election and the opposition Congress party has a fair chance to form the government at the Centre with the support of regional allies, a Fitch Solutions Macro Research report said.
"We at Fitch Solutions are bucking the overwhelming consensus at this juncture that the BJP will most likely form the next government after the upcoming elections. The Indian National Congress party, headed by Rahul Gandhi, has a fair chance too, of steering a coalition government," the Fitch report added.
The only issue that could help BJP is the guaranteed income scheme for farmers. The income support "is a guaranteed cash flow that farmers can use as collateral to take out loans from banks -- it can be levered 3-4 times," the UBS report said. "It also reduces the tail part of the volatility and we think farmers will likely respond to it positively," the report added.
While the UBS report said the guaranteed income scheme will remain a wild card and "if implemented and marketed well, could influence voting behavior," especially because the Feb 1 Budget contained measures, including an annual Rs 6,000 payout to marginal farmers.
The policy may reap dividends because it involves a yearly rather than a one-off payment, with the first installment likely due in the next few weeks, the analysts wrote.
However, the Fitch report sighted the Pulwama attack which may allow the ruling party to "drum up nationalistic sentiment and to rally the electorate behind the BJP."