India’s election fever
As the world’s largest democracy goes to the polls the health of India’s economy hangs in the balance.
Fed up with widespread corruption and stagflation, polls suggest that Indians will oust the incumbent Indian National Congress (INC), a party that has held power for a decade, and will turn in droves to the opposition Bharatiya
Janata Party (BJP), which is promising reform.
FinanceAsia backs the BJP because its policies seem to be more in line with the economy’s needs.
The BJP’s manifesto vows to invest in infrastructure and review stringent labour laws. It also outlines measures to tackle rampant food inflation.
While the INC also pledges infrastructure
investment, its credibility is undermined by a
pledge to hike benefits ranging from healthcare
to housing. India may not be able to afford such
largesse after the longest economic slowdown
since the 1980s and the result could be a delay in interest rate cuts.
We are mindful that manifestos can be idealistic and much depends on implementation. To be sure, the economy’s structural problems will take time to correct and the winner may have to depend on the support of coalition partners less enthusiastic about reform.
So markets may be getting ahead of themselves: shares are trading around record highs and the rupee has strengthened against major currencies. As pollsters predicted a BJP win a net $83.83 million flowed into Indian funds during March, after 23 months’ worth of outflows since February last year according to data provider EPFR.
As a harbinger of the kind of sops to vested interests, haggling and horse-trading that may lie ahead; the BJP said in early April that it would ban foreign supermarkets from entering India’s retail sector, a move which protect its supporters among small shopkeepers.
The election kicked off in early April and will continue until mid May as about 815 million people register their opinion.
A month is a very long time in politics — exuberance should be held in check.