Blog: Dave LeggettIndia confidence takes a dent?

Dave Leggett | 17 May 2004

I heard on the radio this morning that prices on the Mumbai stock market have taken a bit of a pasting following the realisation that there will be a change of government to a coalition led by the Congress Party. But I can recall a briefing I attended at the British High Commission in New Delhi earlier this year at which the Commercial Secretary assured everyone in the room that the elections were nothing to worry about and that Congress was committed to the same economic reform policies as the BJP. So, why the fuss?

The problem, as my Indian chum Deepesh Rathore explained to me in an e-mail earlier today, is that Congress will be leading a coalition in government and that coalition includes left-leaning parties and communists (not a word we hear all that often nowadays). In particular, there will be a reluctance to privatise inefficient and overmanned public sector-owned companies.

Says Deepesh: ‘The Left parties have had the best performance in history in these elections and they are an essential pillar of the Congress government at the centre….Congress does not have the majority to form a government on its own - thus one cannot expect the Congress government to turn a blind eye to the Left Parties' demands. And the demands are quite anti-industry and anti-growth.’

I wonder if India’s fast-growing economy, auto market and growing role as a global auto industry outsourcing location could be adversely affected in the medium term? Sounds like the pace of economic reform and liberalisation could be about to slow.


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