Sensex and poll sense

Everyone knows that Indian democracy and government have come to terms with coalition politics. However, even in a coalition era uncertainty...

Everyone knows that Indian democracy and government have come to terms with coalition politics. However, even in a coalition era uncertainty about electoral outcomes scares investors. That explains the bloodbath on the bourses on Tuesday, when the 30-share Bombay Stock Exchange sensex dived 213 points. It is a moot point whether the sensex was signalling any political preference. That is unlikely since investors are well aware that a Congress-led coalition would not pursue policies very different from a BJP-led government. Differences on secularism apart, and notwithstanding rhetorical nuances on disinvestment, the BJP and the Congress represent a consensus on the so-called Second Generation Reforms.

The concern of the markets is not that a BJP-led coalition would be replaced by a Congress-led coalition. Rather, it is that neither national party may end up leading any coalition. That is why the reassuring statement of the Congress Party spokesman, Jairam Ramesh, that the party has three pro-reform ex-finance ministers in its top echelons — Pranab Mukherjee, Manmohan Singh and P. Chidambaram — is hardly relevant to the situation. Even the reassurance that the United Front government of the late 1990s was pro-reform and that a 2004 re-incarnation of that Front will similarly remain pro-reform is not material to the context. The question troubling investors, the markets and the general public, is whether or not the on-going general elections will throw up a clear winner or not. In the absence of a clear winner, the resultant horse-trading, with due apologies to the equine species, can give exaggerated importance to a clutch of marginal political players who may then influence specific sectoral policies in directions that hurt investors, if not the rest of the voting public. Such is the basis of the present fear on the markets. What is particularly troubling is the fact that this uncertainty will continue for a full two weeks till May 13, when the final results of the general elections will become known.

In any modern economy this prolonged period of political uncertainty can have disastrous economic consequences. This newspaper has already advised investors not to panic. As for political parties, both the BJP and the Congress have made some re-assuring statements and other political parties also step forward and re-assure investors about their real intentions on economic reform. Reading the manifestos of some of the smaller political parties, including that of Left parties, is of no help since few of them mean what they say and implement what they mean when in power. Hence, the sooner political parties cut out their populist rhetoric and speak the truth on the direction of their intended economic policy the better for all.