India Prime Minister Modi’s GST, banknote reforms tested

Sam Panthaky | AFP | Getty Images

Indian Prime Minister Narendra Modi (C) holds up his inked finger after voting in Ahmedabad, the largest city in the Indian state of Gujarat, on December 14, 2017.

India’s ruling Bharatiya Janata Party (BJP) has seen its majority squeezed in a local election in Prime Minister Narendra Modi’s home state of Gujarat.

The vote, which took place Friday, revealed that the BJP had claimed 99 seats in the 182 seat-strong legislative assembly. The BJP had targeted 150 positions, but saw its previously held 115 seats reduced by the opposition National Congress.

Modi’s rocky victory was pinned down to pain caused to voters by his economic reforms, namely the implementation of the Goods and Services Tax (GST) earlier this year and the sudden withdrawal of 500 and 1,000 rupee notes in November of 2016 to crack down on corruption.

The Gujarat vote, as well as a simultaneous legislative assembly election in the Himalayan state of Himchal Pradesh, were viewed as informal referendums on Modi’s economic policy.

The BJP emerged with the majority of seats in both votes.

India’s Nifty index finished 0.54 percent higher, following a lower open Monday on news that the contest was close in Gujarat. The rupee was steady against the dollar, after some volatility in early trade.

Despite Modi’s party winning fewer seats in Gujarat, Roger Jones, head of equities at asset manager London & Capital, reiterated that he was bullish on India. He described the outcome as “quite a reasonable result.”