Results of the crucial five state assembly elections will be declared on December 11 and the outcome could prove to be a game changer for both the ruling Bharatiya Janata Party and the Congress.

Share Market Live

NSE

"Out of the five states, outcomes of three states that are presently under the ruling party are more crucial," said Radhika Rao, economist at DBS Bank told CNBC-TV18 on Tuesday.

"Moreover, the outcome of these elections could be used as an estimate of what is going happen in general elections. These 5 seats make about 15 percent of the lower house, so though we may get a direction, it would not be conclusive," she said.

“If one were to look at 2009 assembly versus general elections and 2013-14 assembly versus center elections there is no fixed pattern in terms of who they vote for and who actually comes in power,” said Rao, adding that the history gives us a mixed message in terms of how much relevance state elections were.

The narratives by parties is usually populist before every elections and if the election results are not in favour of the ruling party then we could see more populist measures but it is unlikely to show in the fiscal deficit for FY19, which is the markets are pricing in a miss. “We are of the view that even if there is a miss there is going to be a very narrow increase in the deficit target,” said Rao. FY19 fiscal deficit target is 3.3 percent of GDP, which will likely be 3.4 percent, she said.

According to Rao, the 8.2 percent GDP seen in June quarter will not be seen in Q2FY19. It will be around 7.3 percent and GVA will be bit lower, she said, adding that this moderation in momentum will continue till at least mid-2019.

Have you signed up for Primo, our daily newsletter? It has all the stories and data on the market, business, economy and tech that you need to know.