Indian Prime Minister Narendra Modi's Bharatiya Janata Party suffered a humiliating defeat in Delhi state elections on Tuesday – its first major political setback – laying potential road blocks for its national reform agenda.
Aam Aadmi Party (AAP), or Common Man Party, grabbed 67 seats out of 70 seats in the Delhi assembly, the biggest ever victory margin for any party in the capital. The BJP won the remaining 3 seats.
Founded in 2012, AAP, led by former tax official Arvind Kejriwal, has captured the hearts and minds of disenchanted Delhiites looking to eradicate the rampant corruption that has plagued the country for decades.
While Delhi is not very significant in electoral terms, state elections are important for control over the upper house of parliament, where the BJP is in a minority. The decisive victory will allow AAP to send three of its members to the 250-member upper house, setting the BJP back further.
"Admittedly, the loss of Delhi is a setback for plans to consolidate power in the upper house, where reform bills are being stalled," Vishnu Varathan, senior economist at Mizuho Bank wrote in a note.
"Nevertheless, the reality is that with just 17 million population, Delhi's mandate does not translate into a wider rejection of BJP by India; especially corporate India," he said.
'Exception rather than trend'
While the Delhi election is indeed a blow for Modi, Rajiv Biswas, chief economist, Asia-Pacific at IHS agrees the outcome of the Delhi election does not translate to a nationwide trend.
"It's not surprising AAP performed strongly in Delhi because that's where it has its roots, so I don't think we can translate this result to a nationwide trend," he said. There are still questions over Kejriwal's credibility as a leader, Biswas said, given his party has yet to develop a comprehensive agenda beyond fighting corruption.
Nevertheless, while AAP may not be an immediate threat to the BJP, Biswas says the Delhi elections due mark an end to Modi's honeymoon period.