In what is undoubtedly good news for India, for the East Asian region and for countries like Australia, the pro-business Congress Party-led government of India has retained power in the five week long poll in the world’s biggest democracy.
Prime Minister Manmohan Singh’s ruling coalition won an overwhelming election victory when the votes were counted and tallied over the weekend.
It was a much larger than expected victory and came at the expense of the Communist and leftist parties, and from smaller regional and religious-based groups.
India’s main communist party is set to lose as many as 27 of its 43 seats, the electoral commission said at the weekend.
The communists paid heavily for deserting the government last year over a nuclear deal with the US.
And Mayawati, the controversial chief minister of Uttar Pradesh State who was tipped as a possible kingmaker, failed to make significant electoral gains which would have given her influence in a possible coalition with Congress.
The result has boosted hopes for a stable government, especially with the impact of the global recession hitting the country, and tensions with Pakistan remain intense.
The poll result means that reviving India’s $US1.2 trillion economy, may be easier, despite the global recession.
The Reserve Bank of India has forecast the economy to grow 6% this year, impressive by western standards, but the slowest since 2003.
As well, the government faces the prospect of instability in Sri Lanka, despite the government there claiming to have beaten the Tamil Tigers.
Muslim Bangladesh remains a worry and India itself faces continuing armed struggles in the hill provinces in the east where Maoist and separatist guerrillas still operate.
But the Congress-led coalition did better than expected and looks to have ended up just short of an outright majority.
That means its coalition this time will be much smaller and more manageable.
The Congress coalition was projected to win 261 seats, short of the 272 needed for a parliamentary majority.
The opposition Bharatiya Janata Party (BJP)-led opposition alliance looks like having 160 seats and a Third Front of communist and smaller groups 58 seats.
Illustrating the extent of its improved showing from the 2004 election, the returns show Congress alone won 205 seats, compared with 145 in 2004.
The BJP will have 117 seats, down from 138. The communists have been slashed as well and several regional political leaders who had national aspirations, also failed to make an impact.
With India’s stockmarket surging this year (the Sensex index is up 23% this year to 12,173.42 and the Nifty Index 24% to 3,671.65) businessmen and foreign investors say the stage has been set for another rally in the markets…
They expect investors to also vote for the new government by driving the Bombay Stock Exchange’s benchmark Sensex Index up by between 10%-25% in the next few weeks now that all the uncertainty about the election have been removed (and fears of possible attacks by those responsible for the attacks on Mumbai late last year).
An estimated 430 million ballots were cast in the five-week poll which required 834,000 polling stations.
Foreign media say the new government should be able to proceed with plans to ease foreign investments in insurance and banking with the communists out of the coalition and no longer a power.
They opposed similar moves when in government for much of its term from the 2004 poll.
The two sides parted ways in July after four years of wrangling on issues ranging from allowing retailers including Wal-Mart into the country to increased foreign ownership of insurers.
(It’s why Woolworths has a wholesaling joint venture with the huge Tata Group of India which is currently selling around $A100 million of mainly electrical goods.)
Australia’s exports to India have risen sharply over the last few years to $A11.85 billion in the year to June 2008.
That makes the country our 8th biggest export market. Imports are running at a round $A1.2 billion. India is not a top 10 importer.
Foreign investors will be watching the new government to see whether it loosens these ownership restrictions on foreign direct investment in sensitive sectors such as insurance, telecoms and retail.
A plan by an Indian Telco and a big South African mobile group to merge a couple of years ago fell apart on nationalistic grounds about foreign ownership and big business rivalries between Indian families.
The government’s approach to controlling the still growing consolidated government budget deficit, estimated at over 12% of gross domestic product, will be another test of its resolve and claims to be good economic managers.
The election is also likely to revive talks between India, the US and Europe on nuclear non-proliferation agreements and nuclear energy deals and uranium sales (that will be of interest to Australia).
For this reason and for regional stability (and the NATO-led forces in Afghanistan) the situation in Pakistan will top the foreign policy agenda of the new administration with the US expected to renew calls to New Delhi to reduce tensions with Pakistan to help stabilize the situation.
Relations with Pakistan have been in deep-freeze since an attack on Mumbai by Pakistan-based militants last November.
Since then the Pakistan government has come under growing pressure by militants from the Taliban and other groups. All seem to be aiming at taking con
