This weekend saw India’s ruling Congress party suffer bruising defeats in many state elections, hinting that it may be in for a tricky general election at the beginning of next year. The news was welcomed by investors in the country, who pushed the stock market up to a record high in early Monday trading.
India’s leading opposition party, the Hindu nationalist Bharatiya Janata Party (BJP), enjoyed three significant state victories, and it appears investors hope that this will translate on the national stage next year. The more business friendly BJP, led by Narendra Modi, has performed well in opinion polls over the last few months, although the result of 2014’s national election is expected to be close.
India’s benchmark Sensex index reached 21,387 in early morning trading, surpassing November’s previous high mark. Investors appear keen on a change in government after years of Prime Minister Manmohan Singh’s Congress Party ruling with indecision, heightened bureaucracy and stagnating growth.
Despite investors hoping that India would see the sort of double-digit economic growth seen in China over the last decade, the country has slumped somewhat in recent years. Businesses have been turned off the country by its notoriously complex bureaucracy, as well as relatively high levels of corruption.
Speaking to the FT this morning, KPMG India’s deputy chairman, Dinesh Kanabar, said that the country’s economy is ready to take off; it just needs a decisive government to kick-start growth. “I strongly feel that the fundamentals of India’s economy are very much in place, that the growth story which was evident three years back is just as relevant today.
“A decisive government, of whichever party, will put this period of policy paralysis behind us…I am not making light of some of the structural issues, but am convinced that a stable government can deal with them and put India back on track for eight percent growth or more.”
