Foreign investors, joined by domestic trade and industry, were hoping Tuesday that whichever new administration comes to power this week in India will give the country stable government and policies.
India's electorate once again had delivered a fractured verdict in the general elections. The Hindu-nationalist Bharatiya Janata Party (BJP) and its allies bagged the most seats in the lower house of Parliament, but didn't get a clear majority.The Congress Party and its allies emerged second, and the outgoing United Front coalition a very poor third. The United Front government lasted only 18 months instead of the normal five years and resigned when the Congress Party withdrew support.
ALL EYES ON PRESIDENT
All eyes will be on President K.R. Narayanan, who must decide which group to invite first to form a government. If he goes by convention, then the BJP combine will get the first chance. Industry leaders, while disappointed that there was once again a hung Parliament, were trying to look ahead and making the most of the situation.
''If one party has a clear mandate, industry will give it full support,'' said K.K. Modi, president of the Federation of Indian Chambers of Commerce and Industry. ''One of the biggest factors causing industrial slowdown is political uncertainty, and the situation will improve once the clouds of uncertainty lift.''
''The concern is not which party comes to power, rather how stable the government is going to be,'' U.R. Bhat, chief investment officer of Jardine Fleming India Asset Management, said in Bombay.
''We need stability of policy rather stability of parliamentary seats,'' said Subodh Bhargava, chairman of automaker Eicher Group.
If the BJP coalition comes to power, both Indian and foreign investors will carefully watch how the party pursues its economic policy. In its election platform, the BJP said it would restrict foreign investment to infrastructure and ''priority'' sectors, bar foreign companies from entering insurance, and introduce measures to protect domestic industry.
BJP's Senior Vice President, K.L. Sharma, reiterated in Delhi that the party's economic policy would encourage domestic self-reliance. ''There is no other alternative,'' he said.
But N. Kumar, president of the Confederation of Indian Industry, said he was optimistic that industry would be able to persuade the BJP to stay on the reform course. He said stability was needed not only to improve the sagging economy, but some reforms needed a longer time frame to implement.
Official data on economic growth and trade for the fiscal '98, ending March 31, suggest that any government will have a tough time. L. Lakshman, president of the Associated Chamber of Commerce and Industry, said the economy is faced with severe demand recession, declining export growth, a widening fiscal deficit, a low level of capital expenditure, a high level of government spending and subsidies, lack of investment in infrastructure and the failure to sell off state-owned companies.
Official projections released late last month said economic growth in fiscal 1998 will be down to 5 percent from 7.5 percent a year earlier.
India's exports suffered a setback in January, registering a decline of 7.4 percent over the same month a year ago. Export growth during April 1997 to January 1998 is down to a meager 2.3 percent. Imports also contracted during January by nearly 6 percent. However, imports grew by 6 percent over the 10-month period of April 1997 to January 1998.
According to economist D.H. Pai Panandiker, exports are doing badly partly because India did not have a surplus of agricultural commodities, and partly because the country had ceased to be competitive in the international market.
Mr. Lakshman said industry is looking for a transparent and nondiscretionary policy on foreign direct investment that identifies priority areas and has a clear approval process. He said the current case-by-case approach should be abandoned. Mr. Lakshman also said private companies should be allowed to enter insurance to facilitate better risk management.