The re-election of India’s Congress party should provide five years of political stability to push vital reforms and growth that could help lift millions out of abject poverty, economists say.
The center-left Congress won its biggest mandate since 1991, confounding expectations the polls would throw up a fragile coalition that would be unable to take any controversial steps to further open up the economy.
“These are the best election results in nearly two decades,” said Rajeev Malik, economist at Australia’s Maquarie Securities after the Congress-led alliance captured a projected 255 to 260 seats against 160 for the main opposition bloc led by the Hindu nationalist Bharatiya Janata Party.
PHOTO: AFP
“They’re good news from both the aspect of a continuation of economic policies and an emphasis on much-needed economic reforms,” Malik said.
LIBERALIZATION
More liberalization to pull in foreign investment has long been prescribed by economists as the best way to boost growth in India and alleviate poverty in a country where more than 40 percent of the 1.1 billion population live on less than US$1.25 a day.
But moves such as privatization, introducing flexible hire-and-fire laws, opening up the retail and financial sectors to foreign investors and the creation of special economic zones have proved highly contentious.
In some instances, such as the creation of sprawling duty-free business enclaves to spur industrial growth, there have been deadly clashes over land rights.
Economic reforms were bitterly opposed by the communists, who propped up the last Congress-led coalition led by Indian Prime Minister Manmohan Singh for most of its five-year term.
He is known as India’s “economic liberator” for initiating the first wave of reforms in 1991 when he was finance minister.
The so-called “dream team” of Singh and another arch reformer, P. Chidambaram, who held the finance portfolio for nearly all the government’s most recent five-year mandate, soft-pedaled on major structural reforms.
They focused instead on populist measures such as a national rural jobs scheme and massive farm loan waivers as they walked the tricky tightrope of coalition politics.
However, with the communists having suffered a major reversal and Congress firmly in the driver’s seat, analysts say the government will have no excuse not to press ahead with liberalization.
“They can’t say any more the communists are blocking their reform agenda,” political risk analyst Subhash Agrawal said.
India’s stock market was expected to soar today on the election results.
“The rout of the Left is good news for investors,” said Deepak Lalwani, India director of Astaire and Partners.
Analysts said they expected the government to give an indication of its reform intentions in the budget due in the next couple of months.
Whatever it does, the government must improve India’s antiquated ports and roads, power shortages and other infrastructure woes that are major restraints to stronger growth, industrialists said.
INFRASTRUCTURE
“Our infrastructure is a disaster compared to the Chinese,” said Rahul Bajaj, chairman of leading Indian motorcycle maker Bajaj Auto.
At the same time, economists said the government could not afford any fiscal blowout in spurring India’s growth, which is slowing for the first time in close to a decade as a result of the global recession.
Authorities estimate growth for the fiscal year ended in March was about 6.5 percent after expansion of 9 percent the previous year. They expect it lose more traction this year, slowing to around 6 percent.
Congress has promised more fiscal stimulus but global ratings agencies say too much spending could jeopardize India’s already precarious investment grade credit rating, which is just one notch above “junk.”
The national fiscal deficit for last year was 6 percent of GDP — more than double the target — and around 11 percent if the states’ deficits are included, making it among the world’s highest.
“India faces considerable challenges in balancing the need for short-term stimulus measures” and putting its public finances in order, said James McCormack, head of Asia Sovereigns at Fitch Ratings.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS