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Low farm incomes and the resultant broader rural distress are "electoral issues" and the upcoming state elections will decide if the ruling Bharatiya Janata Party has been able to distance from those, according to Japanese brokerage Nomura.
The state elections in Rajasthan, Madhya Pradesh and Chhattisgarh, which have around 65 Lok Sabha seats, will also reflect a "mood of the nation" ahead of the next general elections in April-May, the brokerage said in a report Thursday.
"The state elections will also reflect the mood of the nation, and the extent to which the BJP has been able to distance itself from the electoral issues of low farm incomes and broader rural distress," it said.
Economic growth had fallen immediately after demonetisation in November 2016 and introduction of the Goods and Services Tax in July 2017, before picking up in the last two quarters.
The brokerage said going by opinion polls, the BJP—which is the incumbent in the tree states—is likely to retain Madhya Pradesh, lose Rajasthan and "remain competitive" in Chhattisgarh.
It said the election results, which will be out on Dec. 11, will be a "mixed bag" for the BJP, but cited historical analysis to suggest that state poll results should not be extrapolated for predicting general election outcomes.
In the past, Madhya Pradesh and Chhattisgarh have voted "overwhelmingly" for the BJP in Lok Sabha elections, but voters in Rajasthan have been less consistent, it said.
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