India Inc votes for non-Left govt

India Inc votes for non-Left govt
Times of India, May 15, 2009, Page 21

Prabhakar Sinha, TNN, NEW DELHI

India Inc is heaving a sigh of relief. Its main worry that the Third Front, with Left parties playing an important role, will form a government receded to an extent as exit poll results showed that the new government at the Centre will be formed by either Congress or BJP.

A senior industrialist, who did not want to be quoted, said though the picture so far was not very clear, it was expected that either Congress or BJP-led coaliations would form the government, a preferable option in the present scenario.

According to Goldman Sachs, the worst fears of the market, that Third Front will play a major role in the new government, will be removed, if the projections of the various exit polls come true. While the fear of Left playing some role in the government exists, the best scenario would be a government without any Left representation, it said, adding, reduction in the seats of the regional parties is a positive sign for decision making.

Citigroup in a report said a coalition led by the Congress or BJP would be the best outcome of the poll. "A combination with the Left could put reforms on the back-burner, while a non-Congress/non-BJP coalition would have more implication for stability than policy," it said.

Industry captains are worried over the stability of the new government. The past experiences showed that non-Congress/non-BJP formations have not been able to give stable governments at the Centre. Manoj Vohra, a senior consultant of Economic Intelligence Unit, said as Congress-led UPA is more acceptable to small parties, it is likely to provide more stable government than by BJP-led NDA. He said as economic reforms have already entered into an irreversible phase, the policies would remain more or less same, irrespective of the combinations that will form the government. But, the issue of stability will affect the sentiment if an unstable combination forms the government.

Goldman Sachs also argued for Congress-led UPA government for stability. It said, "Given the experience of the past five years, the UPA is skilled at building coalition, which could provide some comfort that a stable government will take over post-election.''

The evidence, according to Goldman Sachs, appears to suggest that if a stable government comes to power, markets would be driven by fundamentals and global cues. In that event, leading indicators suggest a recovery in economic activity in the second half of 2009-10. The economic activity has increased immediately after five elections out of seven since 1984, when a stable combination formed the government. The two elections after which the industrial production declined were 1989, when VP Singh-led government was formed and 1996 when Third Front-led government under HD Deve Gowda was formed.