Stable govt will boost growth: Economists

Indian economists hope national elections produce a stable government committed to strong growth, privatisation, infrastructure investment and the outsourcing business which has proved such a winner for the country.

The Bharatiya Janata Party-led government is campaigning for a new mandate on the back of 8 per cent-plus growth, including 10.4 per cent in the three months to December that made India one of the world's fastest growing economies.

"This momentum needs to be maintained, for which strong policies (are) essential (and) which only a stable government can offer," said Bidisha Ganguly, economist at the Confederation of Indian Industry, a top trade lobby.

"The present (strong) economic climate needs to be prolonged and that can happen only if we have stable rule at the centre," Ganguly said.

Some economists give credit for the surging growth to Prime Minister Atal Behari Vajpayee's government but most agree it was also the work of the best rains in a decade in the agriculture-dependent country.

The main opposition Congress party counters that much of the country remains mired in poverty. Congress championed a state-run economy through most of its 45 years in power but began the country's liberalisation in 1991.

Economists hope the new government, to be formed after results are announced May 13, will be strong enough to press ahead with reforms although overall most think a coalition the most likely outcome.

"Any possibility of a hung Parliament would send the market wild. Let us hope this does not happen and we get stability which is so crucial for the market," said Vijay Tilakraj, dealer at KJMC Capital Market.

In noon trade on Wednesday, the Bombay Stock Exchange 30-share Sensex was up 69 points at 5,874. The bourse rose 73 percent in 2003 driven by huge inflows of foreign money trying to get on the Indian stock bandwagon. So far this year, the market has struggled and is down about 250 points.

India's 300 million-strong middle class now has more money in its pocket, with mobile telephone sales approaching 2 million a month and car sales crossing 1 million a year.

The industry attracting most attention in the new Indian economy is outsourcing, which is creating 500 jobs a day.

Ridham Desai, analyst at J M Morgan Stanley, said a stable government would be able to defend outsourcing against a growing backlash in the West, particularly during an American presidential election year.

Many critics say outsourcing to lower cost centres such as India and China is costing jobs in the developed world, making it a political hot topic.

Desai said the government could also improve infrastructure, a weak point in the Indian economy.

"Lower public sector investment during the late 1990s, especially in infrastructure, dampened private investment and constrained the economy," Desai said.

"The aggressive selling of public assets that we are witnessing currently will help raise infrastructure spending, which will aid the pace of private investment and in turn raise growth and create jobs."

The government last month raised more than $3 billion in privatisation revenue in the space of just three weeks to top its selloff target at the end of the fiscal year.

A confident Finance Minister Jaswant Singh said that if voted back to power, the government would be able to raise more than $23 billion annually for five years through public asset sales.

-- AFP