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Gujarat poll verdict could impact India's reforms drive
Monday, 16 December 2002, 20:30 IST
NEW DELHI: The victory of Prime Minister Atal Bihari Vajpayee's Bharatiya Janata Party (BJP) in the Gujarat elections will have a "widespread impact" on his government's economic reforms drive, analysts said Monday.
A section of analysts believe the victory will give fresh momentum to the gasping reform programme by strengthening the BJP's hand at the head of the squabbling coalition in power at the centre.
But others argue that the poll verdict will actually undermine the tough reform measures such as sale of public assets and change in rigid labour laws by strengthening hardline Hindu nationalists who oppose liberalisation.
"The Gujarat election result is certainly going to have a major impact on the country's reforms drive," said Subir Gokarn, a senior economist with rating agency CRISIL Ltd.
"The victory is likely to instil some confidence in the ruling BJP ahead of the national election due in 2004. It will also give some manoeuvring room to the government to push through tough reforms measures," Gokarn told IANS.
The BJP stormed back to power in Gujarat on the crest of a Hindu wave in Thursday's assembly elections. It crushed the main opposition Congress party in the polls held under the shadow of sectarian violence.
Gujarat, India's second-most industrialised state, had for three months since February-end witnessed sectarian violence that killed at least 1,000 people, mainly Muslims. The BJP government in Gujarat was accused of failing to try and stop the attacks.
Buoyed by the BJP's big win in Gujarat, Indian shares staged sharp rally in the early trade Monday on hopes of a revival in the government's on-again-off-again privatisation programme.
At noon, the market benchmark 30-share Bombay Stock Exchange sensitive index or Sensex was quoting at 3,366.53, a gain of 23.56 points or 0.70 percent over its Friday's close.
State-run stocks such as oil major Hindustan Petroleum Corporation, Bharat Petroleum Corporation and Shipping Corporation of India mainly triggered the rally in early trade on privatisation hopes.
"The shares of state-run counters are soaring higher on hopes the government will push through the sales of some blue-chip companies that were stalled over political differences," said Neeraj Deewan of New Delhi-based Quantum Securities.
But some economists, brushing aside the initial market euphoria, warned that the BJP's sweeping victory in Gujarat might see fresh roadblocks going up against reforms, which are already facing fierce resistance.
"It is the victory of the hardline BJP and not the moderate BJP. And we all know that the hardline BJP is less in favour of free-market reforms," said economist D.H. Pai Panandiker.
Political analysts say the Gujarat victory for BJP was because of Hindutva, propagated by hardliners within the party and its allied Hindu rightwing groups.
"The victory will help rightwing groups such as the Rashtriya Swayamsevak Sangh (RSS) and Swadeshi Jagran Manch (SJM) to rear their heads once again. This will not be very good for the economic reforms," Panandiker added.
RSS, which exerts a big influence over the BJP, has criticised the government on several occasions for privatising state-run firms, which it regards as "strategic", and opening up the economy for foreign investors.
The government raised 
48 billion selling state-run companies in April to October this year, less than half of the 120-billion target set for the year to March 2003.
Economists say the continuance of the economic reforms programme is crucial for the Indian government that is battling to cut borrowing from 5.9 percent of gross domestic product last fiscal year and lift economic growth to eight percent.
"The Gujarat poll outcome will weaken the hands of Vajpayee, who is projected as the moderate face of BJP, and this is certainly not good for the reforms drive," said Surjit Bhalla, managing director of Oxus Research and Investment.
Source: IANS
48 billion selling state-run companies in April to October this year, less than half of the 120-billion target set for the year to March 2003.
Economists say the continuance of the economic reforms programme is crucial for the Indian government that is battling to cut borrowing from 5.9 percent of gross domestic product last fiscal year and lift economic growth to eight percent.
"The Gujarat poll outcome will weaken the hands of Vajpayee, who is projected as the moderate face of BJP, and this is certainly not good for the reforms drive," said Surjit Bhalla, managing director of Oxus Research and Investment.
Source: IANS