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Rahul Gandhi: The ‘next Infosys’?
Indian voters have given Rahul Gandhi the status of a mid-cap stock, by promoting him from asmall-cap stock. He seems to have graduated to higher echelons after his apparent success inUttar Pradesh where congress party won substantial seats. Now, the question is can he grow tobecome a large-cap stock on his own merit. There is, however, no dearth of congress leadersincluding Manmohan Singh who sing the praises of Rahul and ‘thrust’ him to Himalayan heightsas if he is the ‘next Infosys.’ Unfortunately, many a time in the real world, obvious prospects forgrowth do not translate into obvious profits (with due apologies to Benjamin Graham). Manypeople hope that he can become a game-changer in Indian politics. Let us wait and watch.
“The Left is left out”:
It is the latest catchphrase of Indian stock market. This pithy commentfrom Bombay’s inveterate bull Rakesh Jhunjhunwala sums up the mood of Indian investors afterthe 2009 mandate. Investors, led by FIIs, may buy into stocks heavily on Monday, the 18
of May2009. Sensex may hit the upper circuit immediately after the market opening. Rupee also maystrengthen by up to four per cent on Monday and it may touch 45-46 in the next one or twoweeks. The prospect of a stable Central government is good news for the bond market. The hopethat the next government may push for disinvestment in a big way has fuelled speculation thatgovernment’s borrowing may come down in the next one year if disinvestment of public sectorundertakings brings substantial money to the government’s kitty.
Congress party: Is it reformist?
Even though the congress party has emerged as the single largest party with more than 200seats, it may not resort to any ‘big bang’ economic reforms that market players are expecting insectors, like, banking, disinvestment, insurance, pension, etc. If one sees its record over severalyears, it is difficult to believe that congress party basically is reform-minded, except for a fewveterans, like, Manmohan Singh and P Chidambaram. Even during 1991-1993, it was forced toadopt economic reforms due to the crisis thrown up in the aftermath of our forex reservesreaching an abysmally low level of USD one billion just enough for two weeks of imports. During2004-09, congress party has cleverly avoided economic reforms by blaming the communistsconveniently. Of course, the communists (except Buddhadeb Bhattacharya) have fought toothand nail in stalling reforms that would have brought long-term benefits to common people.In fact, it was NDA government during 1998-2004 that brought a lot of reforms: bringing downinterest rates drastically, tax reforms, road development through golden quadrilateral and openingup of telecom sector.The bigger conundrum for UPA is that its second most dominant partner is the mercurial MamtaBanerji’s Trinamool Congress; the party that had fought a bloody campaign against the TataMotors’ Singur plant in West Bengal and forced Ratan Tata to shift the ‘Nano’ plant to Gujarat. Noone will be surprised if she plays ‘red card’ for any reforms the congress party pushes for in theUPA. If she really resorts to such blunt tactics, the communists will have the last laugh!
Perils of cheap populism
The biggest and immediate challenge for the government is the presentment of full budget for2009-10. In the last one year, finances of the Central government have become messy andunwieldy, with ballooning fiscal deficit – which is more than 11% for 2008-09, slowing economy,falling tax collections and rising cost of populist schemes, like, NREGS, farm loan waiver and oilsubsidies. The problem with the congress party is that it firmly believes that these populistschemes have won them the 2009 elections. As such, there is merit in expecting that thecongress will stick to its old path of cheap populism. Moreover, none should be deluded intothinking that they will push heavily for disinvestment and such stuff; even in the absence of acommunist albatross around UPA’s neck. For decades, congress has hung on to power bymastering the art of placating the masses by throwing crumbs/sops to them instead ofempowering them with opportunities.