| BUSINESSWEEK ONLINE : OCTOBER 25, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN BUSINESS
Reform Grabs More Seats in Delhi (int'l edition) Tech-savvy free marketeers won big in the October election All of India has been watching the political news coming out of New Delhi. The votes in the recent election are in, and a coalition run by the Bharatiya Janata Party is back in power. Now, the political classes are chattering about how Prime Minister Atal Bihari Vajpayee will run his next administration, how his confederates will behave, and how the BJP will respond to the coup in Pakistan. But there's business news coming out of India, too--news that in its own way tells something about the recently elected government and the chances for reform. Every day, India's computer and software companies make new advances, forge new alliances with Western companies like Microsoft Corp., and hit new highs in the stock market. On Oct. 11, for example, Bangalore-based software maker Infosys Technologies reported an astonishing 134% increase in half-year profits. SOUTHERN COUP. Indians who work in these high-tech companies have long wanted free-market reforms for the whole country, having seen firsthand the benefits of operating in global markets. But Delhi largely ignored this lobby in favor of its own parochial interests. With the recent election, that may change. Why? Three southern states have gained tremendous political clout. These states have been the most progressive in India, nurturing high-tech companies such as Infosys and striving mightily to reform their governments and local economies. Suddenly, the south is occupying center stage in national politics. The parties that dominate the states of Andhra Pradesh, Tamil Nadu, and Karnataka played a key role in returning the BJP to power, delivering 69 parliamentary seats out of the 303 won by Vajpayee's coalition and its allies. Chief among them was the Telegu Desam Party of Andhra Pradesh, whose chief minister, N. Chandrababu Naidu, has been an unflagging reformer since he was elected to state government in 1996. The October election results handed him an overwhelming victory. Tamil Nadu Chief Minister M. Karunanidhi was also reelected after building infrastructure, computerizing state-run schools, and transforming his state into India's auto capital. Ford Motor Co., Hyundai, and much of India's auto-parts industry are located there. Southern politicians, with their new clout in the BJP, are likely to push to replicate at the center what they have accomplished at home. Naidu, for example, has computerized government, minimized the powers of local politicians and bureaucrats, increased literacy, especially among women, and cut subsidies for power and food. He has drawn $1.5 billion in investment pledges from multinationals such as Microsoft. As a result, his state has seen growth go from 5% when he took over to 9.5% annually now. Says Naidu: ''I will bring to the central government all the important things--information technology, telecom deregulation, accountability in government.'' ''ENGINES OF GROWTH.'' With leaders like these, Andhra Pradesh and its neighbors are quickly becoming models for the nation. They are home to the cities of Hyderabad, Madras, and Bangalore, the seats of India's booming software industry as well as the cradles of a nascent manufacturing boom. Industries in these three states are growing at nearly twice the national rate of 5.5%, and together, the states account for 22% of India's total economy. Since July, a Madras-based index of 30 southern stocks posted an investor-return rate of nearly 200%, compared with 47% from Bombay's index of 30 leading national stocks. ''These southern states are India's engines of growth,'' says Subir Gokarn, chief economist at the National Centre for Applied Economic Research in New Delhi. The presence of these states in the ruling coalition gives a big boost to reformers inside the BJP. Sudheendra Kulkarni, an aide to Vajpayee, says the BJP shares the south's desire to modernize India by promoting information technology. ''We are already talking to Intel Corp. and IBM'' about possible cooperation, says Kulkarni. The southern states also support moves to deregulate and privatize state-run industries. All this has boosted confidence, with Moody's Investors Service upgrading India's rating from stable to positive. ''With a more stable government, I think we are in for some good times,'' says Infosys Chairman N.R. Narayana Murthy. Don't expect sweeping reforms overnight: India doesn't work that way. But with the south now joining the struggle, reform has a fighting chance. By Manjeet Kripalani in Bombay _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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