Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.
+1 212 318 2000
Europe, Middle East, & Africa
+44 20 7330 7500
+65 6212 1000
Posted by: Mehul Srivastava on May 16, 2009
India’s ruling Congress-led coalition pulled far ahead of its opposition as votes were counted Saturday, clawing a victory much greater than exit polls and analysts had predicted.
The party and its allies picked up as many as 75 extra seats all around the country, wresting support from Communists, Hindu nationalists and caste-centered parties, returning Prime Minister Manmohan Singh to a second term. Singh is the first Indian Prime Minister since Jawaharlal Nehru to return to power after a full term, defying a nearly three-decade long anti-incumbency factor.
Singh will return to his offices at a time when India’s economy, along with the rest of the world, is struggling to regain momentum. India’s economy could grow as much as 6% this financial year, down sharply from the searing-hot 9 and 10% quarterly growth figures that has made this country of a 1.1 billion people a destination for foreign investment and its 300 million-strong middle class a coveted goal for the world’s manufacturers.
Indian exports fell 33% in the last quarter, its recent stock market rally of about 30% is yet to return the benchmark index to the heights it reached in 2007 (it fell 52% in 2008), and has suffered from mass layoffs in manufacturing and the textile industry.
“When the world is in serious difficulty, we stand one as a nation,” said Singh at a televised press conference, speaking after Congress Party President Sonia Gandhi, the Italian-born widow of the last member of India’s Gandhi dynasty to hold the PM’s seat. “I expect all secular parties to come together to give this country a stable government.”
Singh’s “secular” jab was directed at the Bharatiya Janata Party, India’s second largest political party, which campaigned on a twin cry of Hindu nationalism and economic revvial, and ended up losing 17 seats as ballots were still being counted, reducing its position in parliament to about 166. A BJP spokesman was unavailable for comment, and BJP leader L K Advani has yet to address the media.
With the Congress coalition close to 272 seats out of the 534 contested, this is the most convincing mandate for a political party from Indian voters since 1992, a year that kicked off a series of weak coalition governments that collapsed almost as often as
they held together.
Perhaps the most cheering news for business is the new-found stability of the Indian government and the sobering defeat of the Communists in their strongholds of West Bengal and Kerala. The Communist parties in India, under a group called the Third Front, had resisted major reforms during the period from June 2004 to July 2008 as part of the previous Congress coalition. The communists abandoned the coalition July 22 protesting a landmark Indo-US nuclear deal, leaving the government scrambling for support.
“If the old relationship (between Congress and the Communists) were to be re-established we can almost certainly write off the prospect of a further opening up of key sectors of the economy to foreign competition, let alone any liberalisation of the labour market,” HSBC economist Robert Prior-Wandesforde had warned in a research report on Friday.
That possibility has pretty much vanished – the Congress coalition will need little extra support to form a government, and in television appearances, the leader of the Samajwadi Party, Amar Singh, which won about 21 seats, indicated that he was open to an alliance. The SP had rescued the Congress coalition in July after the Communists moved to the opposition.
In a surprise loss, Palaniappan Chidambaram, who has served as India’s Finance Minister twice, and is considered amongst Indian politicians to be the most friendly to market reforms, foreign investment, industrial growth and rapid urbanization, is trailing his opponent. Chidambaram’s last job was as home minister, a thankless assignment he took reluctantly after the Mumbai attacks in November 2008.
Praful Patel, India’s reform minded aviation minister, whose election travails BusinessWeek profiled this Friday, looks likely to win his first Lok Sabha (House of the People) seat since 1999.
BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.