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Singh’s win will give a new dimension to Indian economy.

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Singh’s win will give a new dimension to Indian economy.


By Cherian Thomas and James Rupert

May 18 (Bloomberg) -- Prime Minister Manmohan Singh’s electoral victory, the biggest any Indian politician has scored in two decades, may loosen political shackles that have restrained the country’s economic growth.

Singh’s ruling Congress party will start forming a new government today without needing the support of communist lawmakers who frustrated plans to entice foreign investment and sell state-owned companies in his first five-year term. The ruling Congress party won its most seats since 1991 in the election, which concluded May 16.

“This is an absolute game changer,” said William Nobrega, the co-author of “Riding The Indian Tiger,’ who advises U.S. companies on investing in the world’s largest democracy. “It will move India at a mighty pace to where it deserves to be in the global economy.”

Political stability will make India a more attractive investment destination as Singh, 76, seeks the funds to stimulate Asia’s third-largest economy. It may also encourage President Barack Obama and his administration to seek greater cooperation in the fight against rising militancy in neighboring Pakistan and Afghanistan.

“This is good for India and good for the world,” said Rahul Bajaj, chairman of Pune-based Bajaj Auto Ltd., India’s second-largest motorcycle manufacturer.

War on Terror:

The U.S. wants Indian help in its fight against Islamic militancy in the region, especially Pakistan. Singh stalled a peace process with India’s nuclear-armed neighbor following terrorist attacks in Mumbai that killed 166 people in November.

“The U.S. recognizes the significance of the election for the people of India,” the White House said in a statement May 16. “President Obama looks forward to continuing to work with the Indian government to enhance the warm partnership between our two countries.”

Stronger Foothold

Wal-Mart Stores Inc. and Prudential Plc are among global companies that stand to gain a stronger foothold in India now the government can function with fewer coalition partners.

“There were so many major initiatives that were sidelined,” Nobrega said. “It will have a phenomenal boost on the Indian economy this year and next

The Congress victory margin may also invigorate what is already the nation’s longest stock rally in three years. The Bombay Stock Exchange Sensitive Index, or Sensex, has risen 26 percent this year, lagging behind China’s 45 percent gain.

“The ‘play’ button will be on” now, said Madhabi Puri Buch, Mumbai-based chief executive officer of ICICI Securities Ltd., a unit of India’s second-biggest bank. “If global cues continue to be positive, the ‘play’ could even become a ‘fast forward.”

The incoming government will need to bolster an economy that’s growing at the slowest pace in seven years as the global recession saps demands for Indian goods. Industrial output fell by the most in 16 years in March as exports plunged by a record.

India as a 'veto power'

India, whose international political ambitions include a permanent seat on the United Nations Security Council, wants to maintain annual growth rates in excess of 8 percent for two decades to reduce poverty.

Gross domestic product has risen more than four times since 1991, when Singh, then finance minister, abandoned Soviet-style state planning and introduced free-market measures. He cut red tape, removed state-enforced production caps on steel and cement makers, and allowed overseas companies such as Ford Motor Co. to set up Indian operations.

Choked Roads

India received about $38 billion of foreign direct investments last year, about a fifth of the flows that went to neighboring China, which opened its economy 13 years earlier.

Singh’s first term as prime minister required the backing of communist parties to form a parliamentary majority.

Communist resistance stalled a bill to raise the foreign investment ceiling for insurers to 49 percent from 26 percent. Singh also failed to pass a bill aimed at removing a 10 percent cap on the voting rights of foreign investors in non-state banks. His plan to permit global retailers into India also foundered. But one can rest assured that all those tweaks will take place this time, and India will emerge stronger than ever.

"All in all, one can expect India to sky-rocket ahead under the leadership of the great economist Dr. Manmohan Singh and his 'dream team'. One will see India recover much faster from the global recession than most countries. If global cues favour India, chances are India might aswell touch the 9.5% growth mark once the world recovers from recession.."
 
Good riddance from the communists! Good ideology but practically stupid.
Yah for a stable govt. I hope Shashi Tharoor becomes the foreign minister. He has an impeccable record as a diplomat and has very good relations with almost every one at the UN. To top it all, he has good experience with how to deal with representatives all over the world! I think he will do a far better job than Pranab Mukherjee.

btw who do you all think should be the Home Minister?
 
Good riddance from the communists! Good ideology but practically stupid.
Yah for a stable govt. I hope Shashi Tharoor becomes the foreign minister. He has an impeccable record as a diplomat and has very good relations with almost every one at the UN. To top it all, he has good experience with how to deal with representatives all over the world! I think he will do a far better job than Pranab Mukherjee.

btw who do you all think should be the Home Minister?

P. Chidambaram, 6 months in he was already doing a fantastic job.
Yea and I would love to see Shahi Tharoor as foreign secretary. Pranab Mukherjee is a senior leader with enormous experience in heading finance, defence, foreign ministries multiple times. So I doubt someone as young as Tharoor despite his credentials will qualify as the 'minister'.
 
As the world battles recession Indian shares surge, up by 2000 points
1 hour ago

NEW DELHI (AFP) — India's ruling Congress alliance received a massive vote of confidence from the stock market Monday, with shares surging on the back of its election win and hopes for substantial reform.

As the outgoing cabinet met to tender its collective resignation ahead of the formation of a new government, the benchmark 30-share index on the Mumbai stock exchange soared more than 17 percent to 14,272.63, up 2,099.21 points.

The rise was so sharp that it triggered circuit breakers that automatically halted trading for the rest of the day to allow the market to cool down.

Analysts said the rally was the market equivalent of a standing ovation for the unexpectedly clear cut verdict delivered by India's marathon general election.

Confounding expectations of a close result and a fractured parliament, the Congress-led alliance won 261 seats at the weekend -- a mandate nobody had predicted when voting began last month.

The tally was just 11 short of the 272 needed to secure a parliamentary majority, leaving the alliance with a shortfall it can easily make up without cutting deals with demanding regional parties.

"This was the big bang event that investors were looking for," said Hitesh Agrawal, head of research with Angel Broking. "Political uncertainty has been completely eased with the Congress party emerging as the single largest party."

Congress alone grabbed 205 seats in its best showing since 1991, giving it the clout to push through a substantial reform programme.

Economists have long prescribed more liberalisation to pull in foreign investment as the best way to boost growth in India and alleviate poverty in a country where more than 40 percent of the 1.1 billion population live on less than 1.25 dollars a day.

"We expect the government to have greater flexibility to boost economic reform and growth from here on," Agrawal said.

Policy implementation by the outgoing coalition had been hampered by the demands of its many constituents -- especially the communist parties -- who repeatedly threatened to withdraw vital support unless their own agendas were catered to.

Voter support for the communists collapsed in the election, leaving the Left Front with just 24 seats.

"The most positive news from the elections is that the roadblock to reforms -- the communist parties -- were trounced," said Apurva Shah, head of research with brokerage Prabhudas Lilladher.

Fund managers expect the markets to surge by another 20 percent in coming weeks, against a backdrop of better-than-expected fourth quarter corporate earnings.

That would be welcome news for the new government, which faces an economy that is slowing for the first time in close to a decade as a result of the global recession.

Authorities estimate growth for the fiscal year just ended in March was about 6.5 percent after expansion of nine percent the previous year. They expect it lose more traction this year, slowing to around 6.0 percent.

Congress leaders continued Monday to discuss who they would invite to join their government, amid suggestions they might pick up the dozen spare seats they need from independents, rather than bringing in an outside party.

Following the cabinet meeting, Prime Minister Manmohan Singh was scheduled to meet with President Pratibha Patil, who was expected to ask him to form the next government.

During a meeting of the Congress Working Committee on Sunday, Singh stressed the immediate challenges facing any new administration.

"Singh said the new government is assuming office in the backdrop of a deep global recession and serious troubles in the immediate neighbourhood," senior Congress leader Janardhan Dwivedi told reporters.

"He said he was confident that the clear mandate would enable the new government to respond to these two immediate challenges effectively."

The volatile situation in neighbouring Pakistan, where government forces are battling Taliban militants, has been of particular concern to New Delhi.
 
^^ Montek Singh was already a part of PM's 'dream team'. But I'm sure they wont elect him, instead go for the versatile Mukherjee.
 
pranab da would be great as defence minister.... i'm sure he'd get us best deal of mrca..... if its not montek then its kamal nath..... though montek would get us out of recession at supersonic speed..... mach 3 :victory:
 

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