The Hindu Business Line : The economic cost

The political world in India has been severely disturbed by the differences aired publicly by the UPA partners over the nuclear deal between New Delhi and Washington, so much so that there is now a distinct possibility of fresh Lok Sabha elections being called before the present House lives out its full term.

Compromise possibility

Whether or not this eventuality comes to pass will be determined to the extent to which the different political players involved in the very public fracas are prepared to go. Indeed, the possibility is there of ‘compromises’ being worked out at the very last minute on the over-arching calculation that the time is not right for any of the political parties involved to go to the hustings.

Be that as it may, the stark fact that remains is that, in the event of a political shift in New Delhi’s firmament, economic decision-making will take a direct hit, with all movement being slowed down to less than a crawl. One is not talking of a fall of the Manmohan Singh Government where, necessarily, the Ministries are empty, thus affecting normal work both as regards policymaking and implementation.

One is referring to the possibility of one of the UPA partners withdrawing support from the Government (thus effectively ceasing to be a ‘partner’ of the UPA regime) but at the same time extending in the Lok Sabha as much support as is required to keep the Government going till such time the electoral prospects on the ground are seen to be better than now.

Profit-taking on bourses

The question is: What will be the economic impact of such a political scene on economic decision-making? And of course on the stock market, which requires much less reason to undertake roller-coaster price journeys, for the most part hurting the millions of small retail players? Indeed, even now, when it is still early days as regards the unfolding political drama, it is reported that profit-taking has begun in a big way on the expectation that the market will plumb the depths once the political battle is joined in right earnest by the politicians.

As far as the stock market is concerned, one would like to imagine that, once the political tremors have settled down (meaning, once the political steps have been taken whatever they are), the bourses will momentarily regain their ‘evenness’, perhaps even rising to new highs if recent occurrences are any indications of the range of market reaction.

One may describe such a denouement as a sign of maturity of the Indian market (where economic fundamentals take precedence over all other indications, including the political) or, alternatively, a re-emphasis of the fact that the market in this country has a life specifically its own, guided by nothing but what the principal players think is important for the moment.

A different story

The story will of course be totally different for the official “economic machine”, so to speak, with work coming to a halt in the corridors of power. Briefly, this cannot be good for the country, and more so when two more years of relative stability in official policy are likely to be replaced by a lengthy period of uncertainty — the likely result of mid-term elections

The question is: Can the economy afford such disruption at this point of time specially when new, strategic international alignments are in the process of being drawn (the n-deal itself being one of its manifestations — and a determinant)? Are we trying to stop the wheel of history, which is an impossibility?

RANABIR RAY CHOUDHURY

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