A Welcome Change

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08 November, 2014

Given the euphoria in business and investor circles after Narendra Modi’s victory in the general elections, it might make sense to recall a bit of history. In 2009, corporations and investors alike had gone berserk when UPA II came to power. On the first day the markets opened after the results, trading was stopped exactly a minute after it began because the indices hit the upper circuit. Trading resumed after almost two hours, but was halted once again because the indices hit the upper circuit once again. The Sensex had opened 10.73 per cent higher, and it went up by 17.34 per cent when trading resumed. Overall, the Sensex had gained over 2000 points in a single day. No mean feat given that the index was just over 12000 before the results were announced.

Compared to the response to the UPA II victory, the market’s reaction to the Modi-led NDA victory seems rather tame. And if one were to go back and read what various market analysts and corporate titans were predicting when UPA II led by Manmohan Singh took over, one would be surprised to see how similar their sentiments were to those being expressed currently.

Of course, one does not need to remind readers how badly UPA II performed — and how many hopes it shattered. And it would also be erroneous to draw the conclusion that just because the Manmohan Singh government disappointed, we should be pessimistic about the Modi government.

There are just too many differences between the current BJP (and NDA) victory and that of UPA II in 2009. For one, this time, BJP alone has 282 seats — that is, it has a comfortable majority even without counting NDA allies. And with partners, it has 336 seats, which gives it a commanding lead over every other formation in Parliament. UPA II never had that sort of numbers — and it had a host of unstable allies, ranging from Mamata Banerjee’s Trinamool Congress to the M. Karunanidhi-led DMK. More importantly, Modi has a reputation for being decisive — something Manmohan Singh was not.

Finally, at the time of writing this column, the news coming out of the BJP camp is that the Modi cabinet may be much smaller than the one during UPA II, with several ministries being merged for more efficient functioning. In UPA II, the pressure to give all allies important ministries ensured that the government was both large and incapable of working cohesively.

Modi has not inherited a healthy economy. He will have to tackle multiple problems on various fronts. In this issue of BW | Businessworld, some of the foremost economic thinkers, industrialists and bankers list out the immediate problems that he will need to look at to restore the Indian economy to its glory days.

(This story was published in BW | Businessworld Issue Dated 16-06-2014)]]>