Friday, May 16, 2014

New Indian Modi BJP Government to Boost Foreign Investor Sentiment

IndusView, Friday 16 May 2014 (London): India is about to get a new government with the final vote to be unveiled today, with investors expecting measures for revival of the economy, business-friendly policies and good governance from the new government. 

A number of exit polls are suggesting that the nationalist Bharatiya Janata Party (BJP) leader Narendra Modi, the leader of India's main opposition party, is poised to win a landslide majority a majority of seats as the ruling Congress party concedes a historic defeat. It would be the first time in 30 years that a single party has a clear majority in India.

The rupee rose by eight paise to its 10-month high of 59.96 against the dollar in early trade at the Interbank Foreign Exchange market.

In its election manifesto, the BJP said it would welcome foreign direct investment in all sectors that create local jobs, except for supermarkets, a setback to global chains such as Wal-Mart Stores Inc and Carrefour.

“India needs a Chief Executive Officer as a Prime Minister that Modi represents,” said Bundeep Singh Rangar, Chairman of London-based consulting firm IndusView. “Modi has captured the Indian vote by combining charisma and clearly pronounced policies and successfully tapped into an anti-incumbency sentiment.

Capital investment contributes nearly 35% to India's $1.8 trillion economy, but it barely grew in the fiscal year that ended in March as delays in clearances from various ministries and funding issues grounded many major projects.

Indian leaders had targeted $1 trillion in infrastructure investment over five years to close gaps preventing growth in manufacturing but policies still inhibited foreign investment.

Growth in Asia's third-largest economy has almost halved to below 5% in the past two years on weak investment and consumer demand, the worst slowdown since the 1980s. India ranked a poor 134 out of 189 countries as a place to invest and start a business.

India's current tax base represents fewer than 35 million, or a dismal 3% of its population. That contrast the size of its middle class estimated to be 250 million people that’s expected to reach 600 million by 2030.

"The more integrated India is into global markets and into the economic architecture of Asia, the more India’s economy will grow and benefit the entire global economic system," said Rangar. “Investors expect policy measures from the new government to put India on a high-growth path on a sustainable basis.”

India will get tougher on territorial disputes with China and in its old rivalry with Pakistan if opposition leader Narendra Modi becomes the prime minister. Modi, a Hindu nationalist who is the front-runner to win the five-week election starting on April 7, has taken an aggressive tone against the two neighboring nations. On the campaign trail, he has warned Beijing to shed its "mindset of expansionism" and in the past he has railed against Pakistan, an Islamic state, for attacks by Muslim militants in India.

India has fought three wars with Pakistan and had a 1962 border skirmish with China. It came close to a fourth war with Pakistan in 2001 but since then, its foreign policy has been mostly benign.

However, Modi’s supporters counter that he offers a vision of prosperity for India, given that he engineered a remarkable economic renaissance in Gujarat, a program that included billions of dollars in investment by foreign companies and economic growth that exceeded the national rate.

The party has promised to set up a Price Stabilisation Fund to check inflation, ensure fiscal discipline and pursue banking sector reforms to deal with the problem of rising bad loans.

With regard to the agriculture sector, the manifesto promises to create a single 'National Agriculture Market' and increase public investment in the farm sector.

Prime Minister Manmohan Singh has already said he will step down after the elections and the Congress is being led by Rahul Gandhi, the latest member of the influential Nehru-Gandhi dynasty.

The election began on 7 April and has been held in nine phases for security and logistical reasons. With 814 million eligible voters, it is the largest democratic election in history.

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