The landslide victory of India's ruling Bharatiya Janata Party in a crucial state poll in Gujarat will help the federal coalition government boost its economic reforms agenda and speed up its privatisation drive.

Analysts said the party's win in the key industrial state on the back of a hardline Hindu campaign would give it confidence within the fractious coalition to take politically sensitive decisions such as cutting subsidies and privatising state firms.

"The verdict is a support for economic reforms. It will help economic decision-making and we are going to see some real movement in the budget in February," said T K Bhaumik, policy adviser with the Confederation of Indian Industry.

Analysts said the victory would also put to rest worries within the BJP and members of its ideological parent, the Rashtriya Swayamsevak Sangh, about the party's waning popularity due to harsh economic policies.

The RSS, which exerts a big influence over the ruling BJP, believes in economic self-sufficiency and protecting employment rather than free-market polices.

"The BJP will now be confident politically that if its policies are not popular it still has a political plank which outweighs the negative impact of any harsh economic decision," said an analyst with a Bombay-based securities firm.

India's Hindu nationalists have vowed to continue with the decade-old reforms programme, including its privatisation drive, but have run into opposition from hardline factions within the coalition, other political parties and labour unions.

Analysts said the finance minister could now push through a long-pending proposal to cut food and fertiliser subsidies and find greater consensus within the party to cut expenditure in a bid to control the burgeoning fiscal deficit.

The emotionally charged elections were seen as a referendum on the BJP's policies, both social and economic, as it followed the country's worst religious violence in a decade. At least 1,000 people were killed in Hindu-Muslim clashes in Gujarat.

The BJP beat forecasts by winning 126 of the 182 seats in Gujarat assembly.

"It (the verdict) is also in a way a mandate for the central government and its policies," Rajiv Pratap Rudy, junior commerce and industry minister, said.

"It would accelerate reforms and strengthen our resolve to continue with the present policies."

Indian markets cheered the BJP's win. Stocks rallied in early trade, with shares of most state-run firms rising on hopes of a revival in the government's asset sale programme, though the benchmark index was down slightly by early afternoon.

Analysts said the country's sputtering privatisation drive could gather pace in coming weeks, after the government ended a three-month hiatus last Monday by deciding to sell two state-run oil firms.

The government buried political differences to announce it would sell a strategic stake in Hindustan Petroleum Corp Ltd and make a public offer for Bharat Petroleum Corp Ltd.

India has set an ambitious target of raising Rs 120 billion in 2002-03 (April-March) by selling stakes in state-run firms, to cut a fiscal deficit that has touched 5.9 per cent of gross domestic product.

International rating agencies cite the burgeoning deficit as the biggest hurdle in the way of faster growth in the Indian economy, which expanded 5.4 per cent in the year ended March 2002.