Political high-wire acts are a game of nerves. A lot depends on how deftly the gymnasts change course when they are up in the air.

The mixed mandate served by the Karnataka electorate has created space for similar leaps—and much more. Each of the three major players has slivers of hope to cling to. The Bharatiya Janata Party (BJP) has done well to emerge as the single largest party. The Congress has managed to stay in the game despite a strong trend against incumbent governments in Karnataka. The Janata Dal (Secular), or JD (S), has held its own to emerge as the balancing factor.

As the single largest party, the BJP should have the first shot at forming a government. However, the big question at the time this editorial was written was whether negotiations would lead to something resembling Karnataka in 2004, when the Congress and the JD (S) joined hands to form the government even though the BJP was the single largest party, or Goa in 2017, when the BJP formed the government despite getting fewer seats than the Congress. A third option is a minority government led by the JD (S), with outside support from either of the two national parties.

The BJP followed a very different electoral strategy from the Congress. Every BJP campaign seems to run in two stages. The party machinery under Amit Shah does the groundwork in the months leading up to any major election. Prime Minister Narendra Modi comes in late in the day to give the core voters a final burst of energy while also winning over swing voters just before they trudge to the polling booths. It is a combination of calculation and charisma. The same script was used in Karnataka. Modi arrived only on 1 May. His speeches on the campaign trail clearly made a difference.

The Congress central leadership led by Rahul Gandhi did jump into the fray as well, but the party banked a lot on the agenda set by its chief minister, Siddaramaiah. The Congress tried to deal with the Modi phenomenon by offering a narrative based on caste politics plus regional pride to counter the Hindu mobilization by the BJP. Meanwhile, the strong showing by the JD (S) will also raise the hopes of leaders of regional parties such as Mayawati, Nitish Kumar, Mamata Banerjee, Naveen Patnaik, Uddhav Thackeray, Akhilesh Yadav and the leaders of the two Dravidian parties in Tamil Nadu, for example.

Siddaramaiah was up against the harsh fact that no incumbent chief minister since Ramakrishna Hegde had been voted back to power by the state electorate. He was also only the third leader after giants such as S. Nijalingappa and Devraj Urs to complete a full term in office. His budget,presented last year, saw a surge in spending despite weak tax collections, and hence funded by market borrowings. Money was poured into social welfare schemes and irrigation projects, the latter at least partly because Karnataka had been hit by drought for two years in a row. The state fiscal deficit went up by more than a third.

Neither the fiscal splurge nor the political strategy worked for the Congress, which lost ground across the state. The BJP went into the Karnataka election in the midst of a growing narrative among political analysts that a few setbacks in by-elections were an early sign that the Modi magic was fading. Karnataka showed his appeal is intact. However, the same lazy mistake of extrapolating from a few results to predict the next national election should be avoided.

What next?

There are two big questions that the financial markets will be thinking about. First, will Modi now take the risk of calling an early general election, before the year ends? Second, will economic policy change in the last year of the Modi government? The answers are interconnected.

Neither question is easy to answer given the fact that Modi is known to take risks by abandoning the standard playbook. A lot depends on what happens in the next few months—the monsoon; the inflation trajectory; the roll-out of Modicare; the state elections in Rajasthan, Madhya Pradesh and Chhattisgarh, which will be straight fights between the two main national parties; and the increase in farm support prices as a counter to farmer distress.

The Karnataka results may have increased the probability of an early national election, before the opposition begins to build broader alliances. Even though every Indian political party loosens the budgetary purse strings before a national election, Modi is unlikely to order a massive splurge on the lines of what the United Progressive Alliance did in March 2008. That is also what financial market investors are banking on right now.

Will Narendra Modi call for an early general election? Tell us at views@livemint.com

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