India

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It is with some apprehension that I comment about the Indian election; the issues are complex for somebody like myself, sitting several thousand miles away. I have over the last 3 or 4 years tried to follow developments in the country before it was cool. Despite the terrorists attacks and subsequent war, I was as optimistic as anybody could be about prospects for global economic growth, of which, India was a key component.

For the last fifteen years, liberalization has been the trend even though it has taken a few bumps across the world in Asia, South America and Russia. It is probably with this wind to the back of market economics that the Economist writes this:

An unstable coalition government, relying on the support of the Communists, is unlikely to prove radical, and may be short-lived. But there are some grounds for optimism: Congress�s manifesto commits it to a policy of sustaining and even accelerating current rates of economic growth. With luck, the coalition it is likely to lead will quickly realise that this will be near-impossible without continued reform: cutting the fiscal deficit; continuing to foster competition; and privatising more state-run enterprises. Rural India�s rebuke for the BJP should encourage the new government to spread some of India�s alleged shine to the gloomier parts of the countryside. Properly interpreted, it should not thwart reform, but spur it.

As many people have pointed out, the Congress party are the ones who started the reform effort over a decade ago that kick started the economy. The question needs to be asked if any left of centre party is committed today as it was a decade ago to liberalising their economies. I don't think the answer to that question is yes. Today, as markets in Asia are tanking, I read this little snippet posted on Drudge from Bloomberg:
India's Mumbai stock exchange halted trading for an hour after the Sensex slid 10.9 percent. The benchmark had dropped 6.1 percent Friday after the new government, led by Sonia Gandhi's Congress party, said it won't sell profitable state assets.

I take to mean she's trying to attract the communist party, who want to end the privatization program, into her government. From what I can tell, the communist's bark is worse than its bite, as this little snippet from the IHTsuggests:
Moreover, when they are not campaigning, the Indian Communists are a realistic bunch.

The only Indian state "where information-technology-enabled services are labeled essential and therefore unable to go on strike is in West Bengal, which is ruled by a Communist party," said Vivek Paul, vice chairman of Wipro, India's largest computer software company by market value, who is based in Mountain View, California.

Don't confuse me as a supporter of the BJP, I have read enough to make me not a fan the party. However, I hate communists even more. This is not to say that the economy will slow or stagnate if the reforms stop. In all likelyhood, the economy will probably continue to grow fast for several more years as the changes made a decade ago were substantial, at least that's what the growth models say. Either way, the election was a win-win situation for the U.S., either it grows fast or more immigrants come here.

3 Comments

Oh, and by the way, BJP are a bunch of people who HATE a lot.

They HATE Muslims and encourage violence against them with a wink and a nod.

They are Nationalists, meaning they probably HATE Americans more than the other parties.

But don't let your little stock market world crumble.

I'm sure 900 million Indians don't care about it at all.

(I'm guessing there are 1 billion there, or so).

Woohoo! my first nasty comment, I'm no longer a virgin.

Savor the moment, Bob.

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This page contains a single entry by Bob published on May 17, 2004 3:13 AM.

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