Elections: More Comments

The feeling is sinking in. The stock market crashed 6% yesterday as it become apparent that the support for the Congress from the Left parties will come with many strings attached.

Writes Shekhar Gupta (Indian Express):

The politicians of the Left, quite similarly, do not know the markets, its style, temperament, sensitivities, swings, the thinness of its skin. It is time both learnt a little bit more about each other. This is a globalising India in a globalising world, so the Left cannot hide from the markets. Similarly, the presence of the Left in the power structure, the message of impatience from the voter in this election, is a reality the markets have to make provision for.

One thing you would say for the NDA is that while it had its Togadias and Swadeshis snapping at its heels, or generally hunting for headlines, it kept them in check, or at least mostly insulated them from its policy-making. As the dominant leader of this coalition, it is for the Congress now, as it recovers from the shock and awe of its unexpected victory, to restore sanity among its leftist partners as well as the equally sentimental bourses.

The Economist writes:

Bad for the credibility of almost every pundit and pollster; bad for political stability; even perhaps bad for economic reform. But the outcome of India’s election has been a triumph for democracy, and the ordinary voter’s refusal, after being subjected to months of self-congratulatory government propaganda about India Shining, to accept rhetoric over results.

The prospect of a period of political jockeying and potential instability will worry investors, who also fear that the election will be taken as a popular rejection of the liberalising reforms of the Indian economy, recently championed by the BJP. In two state-assembly elections held simultaneously, well-known reformist leaders have been ousted.

Congress, for its part, traditionally too proud for grubby coalition politics, had this time assembled an impressive haul of allies. But parliament will be hung, and to form a government it will still need the support of the left, and perhaps of one or two other uncommitted parties, of which the biggest are Samajwadi and the Bahujan Samaj, two lower-caste based parties with their strength in India’s largest state, Uttar Pradesh. Some of these potential partners may balk at supporting Mrs Gandhi as prime minister. One rumoured alternative from within Congress is Manmohan Singh, a respected former finance minister.

An unstable coalition government, relying on the support of the Communists, is unlikely to prove radical, and may be short-lived. But the presence of Mr Singh in Congressas a senior policymaker, at any rate, if not in the top jobis one reason for guarded optimism that the election result will not mean the stalling of economic reform. It was Mr Singh who launched the opening up and liberalisation of the economy in 1991. Congress’s manifesto commits it to a policy of sustaining and even accelerating current rates of economic growth. That will not be possible without more reform: cutting the fiscal deficit; continuing to foster competition; privatising more state-run enterprises.

There are other reasons for cheer. First, one of Mr Vajpayee’s dreams commands consensus support and will surely still be followed: building a lasting peace with Pakistan, a project dear to Congress the last time it was in power. Second, the electoral rebuke for the BJP from rural India might intensify efforts to spread some of the alleged shine to the gloomier parts of the countryside. Properly interpreted, it should not thwart reform, but spur it.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.