Stop, Look, Go

Naturally, the stockmarkets trembled violently as the week opened with the AP slide and went on to reveal more crashing surprises about the bjp. Says Ajay Bagga, ceo, Kotak Mahindra Mutual Fund: "Markets are worried about the continuity of the strong economic growth, whether the new government will have a strong political will to continue reforms so that growth is not constrained. The impact won’t be immediate, but depending on policies, it’ll be felt in the future."

All the experts Outlook spoke to agree on "three things" that’re sure to happen which will signify a dilution of liberalisation: more subsidies in food (power and irrigation subsidies come from states), burial of labour reforms and a shutdown on the privatisation of profitable PSUs.

Says N. Srinivasan, D-G designate, cii: "Disinvestment is an area of concern and cii has a tough task ahead here." Tarun Das, though, is unhesitant. "The future of reforms," he says, "is not in question. Perhaps the pace is. Nobody is game on privatisation of oil companies yet anyway. The world is looking at India for its economic growth and business opportunities and that’s not related to the political factor anymore."

A change of pace is inevitable with opposing parties exchanging seats. Subodh Bhargava, MD, Wartsila Diesel, feels that being out of action for long, Congress will take time to pick up the momentum of reforms. "But the thrust will be on infrastructure, agriculture, disinvestment and labour."

There is a surprising groundswell of support for the Left parties’ views. Even the rss’ Tarun Vijay says "there is a serious need to regenerate the rural economy and the Congress is talking about that". He also feels since the Left in Bengal is opening up, it will contribute to a liberal mindset at the Centre. Industrialist Rahul Bajaj adds, "Stability is the key to economic growth. The Left are people of integrity who won’t simply pull the plug whether they join the government or not".

Senior Left leaders like the CPI(M)’s H.K.S. Surjeet say some basic economic issues (part of the common minimum programme) have to be discussed immediately. One of them: the oil price hike put off by the polls. The Left have opposed such hikes in the past. Still, it was one of the first things the UF government did in 1996.

Labour, however, is relieved. AITUC secretary in Delhi D.L. Sachdev feels the unions will have more bargaining power now, though they are reconciled to selective disinvestment. But they also hope that the Congress attack on labour will be less fierce.

How will the world react? Fitch Ratings MD Anil Tandon says they’re watching for signals the new government puts out and added that for now India’s rating will remain the same. Kristin Lindow of Moody’s India desk in New York says: "One can only hope the rhetoric of the party in opposition and of the campaign trail will not be the government’s stance. I expect privatisation will slow down in a compromise with the Left. But in many areas, especially fiscal, it’s clear the economic spokespeople for the Congress are well aware of the imperatives. We’ll wait for the budget, they might surprise us."

Sums up Deutsche Bank’s Sanjeev Sanyal: "This will be a true test of the hypothesis that there is a broad national consensus on the direction and need for economic reforms. " For first test results, watch this space.

Paromita Shastri with bureau reports