The waiting game


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He liberalised India’s economy in 1991 but outgoing Prime Minister Manmohan Singh oversaw India’s worst economic position in decades last year.

He liberalised India’s economy in 1991 but outgoing Prime Minister Manmohan Singh oversaw India’s worst economic position in decades last year.

Since the beginning of the year, India’s two main stock markets have rallied to record highs, the rupee has put on more than 2 percent, and billions of dollars have been ploughed into the country by foreign investors.

While there has been some fall back since late April as investors cash in on profits and show a degree of caution ahead of election results, the message has been clear: investors expect a stable, pro-market government to be installed in India on May 16 – most likely led by Narendra Modi.

Modi is the clear preference for business. Gujarat, where he has been chief minister for 15 years, has repeatedly recorded double-digit growth, out-performing the rest of the country, on the back of economic reforms that have built up industry and attracted foreign direct investment.

On the national stage, the BJP has promised to create 250 million much-needed jobs in the next 10 decade, construct 100 “smart cities” and build a high-speed rail network.

Despite concerns Modi has left behind the Gujarati poor, the BJP’s manifesto is attractive.

It’s even more alluring considering India’s predicament less than a year ago.

In August, the rupee sank to a record low of Rs 68.85 as it became clear the current-account deficit had ballooned out to almost 5 percent (it is now about 2.3 percent), and, coupled with a fiscal deficit, concerns were expressed that India may face a balance-of-payments crisis.

That headache was exacerbated by fears the US was preparing to pull back on its monetary stimulus, plus rising inflation and a significant drop in private corporate investment. Growth was at half of what India had been recording for the previous 10 years.

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