Expert Zone

Straight from the Specialists

Steps the next government should take

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

India’s economy is tottering, inflation is too high and growth too low. The Congress-led UPA government allowed the economy to drift during its second term. Why? Because it did not focus on real issues, failed to govern effectively and did not carry out any significant reforms.

New legislation became almost impossible, with coalition partners such as the TMC and DMK threatening to pull out (and they eventually did). On top of that, successive scams made it impossible for the government to function normally.

The economy came under stress due to political reasons. To what extent the next government will be able to undertake reforms will depend on how strong the government is. If the BJP and its coalition partners come to power as expected, there is a good chance the economy will turn around. The BJP has managed coalitions well in the past.

The new government will have to immediately address two critical issues. First, inflation has to be brought back to an acceptable level; and second, growth has to be raised to 8 percent to generate employment.

The election question

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(This piece comes from Project Syndicate. The opinions expressed are the author’s own)

With street protests roiling democracies from Bangkok to Kyiv, the nature and legitimacy of elections are once again being questioned. Are popular elections an adequate criterion by which to judge a country’s commitment to democracy? Beginning next month, elections in Afghanistan and India will throw this question into even sharper relief.

How election years affect the stock market

(Any opinions expressed here are those of the author and not of Thomson Reuters)

The ongoing stock market rally has been primarily supported by foreign investors. The rupee also rose to a near three-month high against the dollar on Friday.

It is rather unusual for the Indian market to jump in pre-election months, particularly after 1996 when coalitions became the new political strategy to make up for shortfalls in parliamentary majority. In most election years, the market had actually fallen just before the elections – in 2004, by more than 10 percent.

India’s decade of decay

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(This piece comes from Project Syndicate. The opinions expressed are the author’s own)

Indian Prime Minister Manmohan Singh, who has been in office since 2004, recently held what was only the second press conference of his current five-year term, which is rapidly approaching an inglorious end. Betraying his yearning for approval, Singh told the assembled journalists that he hoped that history would judge his tenure more kindly than his political adversaries do.

Time to ride the rally in the run-up to 2014 elections

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Election fever in the world’s biggest democracy is gripping India in the run-up to general elections due in 2014. In the coming months, politics will be in focus especially among investors.

Assembly elections in Chhattisgarh, Delhi, Madhya Pradesh and Rajasthan were a prelude to next year’s election. The four states make up 72 seats in the Lok Sabha. Historical data suggests the electorate votes on the same lines for the Lok Sabha in case state polls are held within 12 months of the general elections.

If change does come in 2014

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The market is pregnant with expectations of a change after the general elections which must be held by next May. You would have to travel far and wide before you come across anyone in India’s financial market who is not hoping – even praying – for change.

The mood on the current policy direction is so gloomy that any alternative is looking like manna from heaven.

The resurrection of Congress

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(This piece comes from Project Syndicate. The opinions expressed are the author’s own)

The overwhelming victory of the Indian National Congress in elections in the important southern state of Karnataka in early May has shaken up the country’s political scene. India’s troubled ruling party had appeared headed downhill in the build-up to the next general elections, which must be held by May 2014. Now, following its huge win in Karnataka, all bets are off.

India Market Weekahead – Inflation, FII inflows to be key

(Any opinions expressed here are those of the author and not of Thomson Reuters)

The bulls are back and their four-week winning streak saw the Nifty close at a 29-month high of 6107 on Friday, up about 2.75 percent for the week. Liquidity flows remain robust, fuelling the momentum despite political heat in New Delhi.

The Congress win in Karnataka boosted positive sentiment, followed by industrial output data that was marginally better than expectations. The overall earnings season has been favourable and along with the global rally provided the right environment for the markets to cross the psychological barrier of 6100 in the Nifty and 20000 on the Sensex. The only thing missing is euphoria on the street and broader participation by investors.

The burden of India’s cash transfer scheme

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The government’s cash transfer scheme (CTS) has been accepted by economists as the most  efficient method of delivering subsidies to the poor. This became possible with the identification of the poor after the introduction of “Aadhaar” or unique identity scheme. The scheme is going to be implemented from the beginning of 2013.

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