Investors are spooked but foreign manufacturers are largely unfazed by the Congress Party’s election win in India, according to reports in today’s Wall Street Journal and Financial Times.
The Indian stock market plunged by a record 16% since the defeat of the right-wing BJP government and, especially, since the Left Front, a parliamentary coalition of the influential Communist Party of India (Marxist) and three others, announced it would not join the government. The refusal of the Left Front parties to join a government headed by Sonia Gandhi is viewed as a signal that they will oppose rather than take responsibility for privatizing the state sector, dismantling labour rights, lowering corporate taxes, and cutting social programs, which could complicate Congress’ expected effort to continue these initiatives. Although investment banks and mutual fund companies, who are more sensitive to short-term shifts in the political landscape, have been dumping their Indian holdings, Western business executives interviewed by the WSJ and FT, especially in the burgeoning high-tech sector, are viewing the results with equanimity, partly on the basis of their favourable experience in states governed by the CPI-M and other left parties. WSJ and FT (sub only) articles available on www.supportingfacts.com Sorry for any cross-posting.
