The panic on the bourse this week was wholly unwarranted, unless of course one is to presume that investors are supporters of the NDA and have been seized by panic over some exit polls. Considering the fact that all middle class Indians in cities like Mumbai, New Delhi, Hyderabad and Chennai are not exactly voting for the NDA, the panic looks a bit stagemanaged. More to the point, there is really no reason for any investor to worry that either a hung parliament or a Congress-led government will be bad news for the economy. True, a hotch-potch Third Front could be an economic policy spoiler, but that scenario is unlikely. It is now clear that at the end of the day India will have a government led either by Atal Bihari Vajpayee or by Sonia Gandhi. The markets need not fear either. Further, the market need not also fear a hung Parliament in which a minority government comes to power since it was the minority government of P.V. Narasimha Rao that implemented the reaching economic reforms of 1991.What then explains this market nervousness? Some have alluded it to external factors like the decline of the dollar, fear of an oil price hike and concerns about the over-heating of the Chinese economy. Each of these could explain in part the generally bearish sentiment for some time now. None of them is news this week. In any case, these factors alone cannot explain what happened on Monday and Tuesday. Perhaps the Securities and Exchange Board of India should examine what really happened. The Congress and the NDA should in any case reassure markets that if either of them comes to power they will pursue sensible policies. The time for populism is over. The country has gone through more than a year of elections. The next six months will have to be about getting policies right, especially fiscal policies.It goes to the credit of the economic managers in the government, that they have managed the economy responsibly and professionally during an interregnum of political campaigning. The RBI has been effective in dealing with external and internal challenges. The promise of a good monsoon augurs well for the future and economic growth this year is expected to be upwards of 6.0 per cent. Given all this, investors should feel reassured rather than fall prey to market manipulators.
