India will remain popular with investors , either way – Modi Bihar win or lose

                                       Will he sweep polls in Bihar?

Whatever BJP may say, PM Narendra Modi’s image as some one who can pull it through, is very much at stake in Bihar elections, considered crucial for India’s political economy. A victory for the BJP will embolden the  Modi Government at the Centre to go whole hog for the economic reforms, popular or unpopular. There would be a new confidence of sorts on the faces of his Cabinet colleagues, chiefly Finance Minister Arun Jaitley, IT and Telecom Minister Ravi Shankar Prasad. In fact, he does not have too many high profile ministers. External Affairs Minister Sushma Swaraj will keep her composure –either way, win or lose.

But what if BJP loses in the eastern state of Bihar  and Nitish Kumar returns as Chief Minister with the help of Lalu Prasad who would have then revived several notches and carry much more authenticity at the national level. Several other Chief Ministers like Mamata Banerjee from West Bengal, Akhilesh Yadav from Uttar Pradesh, Navin Patnaik from Odisha may then be cosying up more to each other in the hope of sewing a national alternative to Narendra Modi.

Will it then make the Modi Government weak at the Centre and how will the domestic industry and global investors take it?

Well, my guess is the Indian economy at this point of time is enjoying certain circumstantial advantages, cheap oil and other minerals being the main contributors. The country is net importer.  Industrial growth may not happen at the pace required, but with raw material prices dropping, the margins would eventually improve for the companies, especially those who do not carry huge debt on them. The services sector comprising tourism, hotels, trade and transport would keep moving the economy between 7-8 per cent on the growth trajectory.  

Onion prices would drop with fresh crop arrival and the pulses prices would get stable at some level, possibly and the people would then find Rs 100-120 a kg as new normal. Prices of vegetables like potato, tomato, etc would also get a new normal of Rs 40 to Rs 50 a kg.

When it comes to global investors, investment would continue to come in areas like telecom, automobile while the pace of the same in sectors like infrastructure such as roads, ports and renewable energy would depend on the kind of morale the Modi Government is able to retain even if it loses politically crucial Bihar.

As for the stock markets,  the experience tells us the movement is largely in sync with global cues with China and the US being movers and shakers, but still India would continue to remain on the radar of fund managers for the same reasons listed above.

Some of the touted reforms like Goods and Services Tax may get delayed, but my sense is GST is over-hyped. India achieved plus 8-9 per cent without GST.

But what will really scare the investors is this non sense of beef, communal frenzy around such issues, which must stop. Hopefully, after Bihar polls, it should subside.

So, India will remain popular with investors , either way –win or lose BJP in Bihar ! 

Pic: PMO                

Time Indian ruling parties knew their onions, tomatoes if they do not want to be in lentil soup!            

If there is one thing the western economies, mainly the European Union and the US are looking for, it is inflation. Say it to an Indian and she would describe you a nut case. But that is what European Central Bank President Mario Draghi meant when he reviewed the monetary policy and, kind of, promised more stimulus to the European economies.

In India too, Prime Minister Narendra Modi’s government , has brought down the headline inflation , both in the retail and wholesale markets. But the trouble is , these are only the headline numbers – people do not seem to be convinced. When you show them the Consumer Price Index (CPI) data of 4.41 per cent for September,2015 against 5.63 per cent in the same month last year and even more pronounced drop in Wholesale Price Index of minus 4.54 per cent, there is a kind of disbelief on their faces.

They , instead show you increases in prices of  pulses , the main source of proteins for a majority of Indians, ranging between 100 and 140 per cent .  Leaving percentage aside, some of popular lentils like Tur, are selling at Rs 200 a kilogram (well above three dollar), triggering an outcry among the influential middle class Indians who are the opinion leaders. 

The government , in a way, was caught off-guard as those in-charge remained somewhat complacent until, the pulses price became an election issue in the crucial state elections in Bihar where the Prime Minister’s BJP is pitted against a formidable combination being spear-headed by well-rated Chief Minister Nitish Kumar.

Having woken up , rather late, the Food and Consumer Affairs Department , being helped now by  Finance Minister Arun Jaitley, is doing fire fighting of sorts with an oversight of the PMO.  Wish, it had come a few months earlier.  

In the Indian political-economy, the costly mistake often repeated by the ruling parties is complacency with regard to food prices and food management of essential items like onion, tomato, seasonal vegetables and cereals. No amount of blaming the rain gods helps when sky-rocketing food prices hit the ‘common man’, the term very popular in India.

While it is early days for predicting the outcome of Bihar elections,  pulses would have weighed on voters,  along with the ever- teasing onion.

It is time the Indian ruling parties knew their onions, tomatoes if they do not want to be in lentil soup!    

Pic: Department of Food, GOI