Modifesto

Modi win is blow for Tesco, good for investors

A win for Narendra Modi would be bad news for Tesco and its rivals, but good news for other investors. The Indian opposition leader's party says it won't allow foreign supermarkets to enter the country if it wins the general election. But that is just one discordant note in a manifesto that is sweet music to financial markets.

The decision by Modi's Bharatiya Janata Party (BJP) will leave some retailers fuming. Britain's Tesco, which has already received approval from the current Congress Party government to start a joint venture with the Tata Group, may have to drop its plans. Carrefour, which said last month that it was "thinking about India," will be able to do little more if the pronouncements become national policy.

Modi's decision is a calculated move. The BJP counts the owners of several million mom-and-pop stores as among its most loyal supporters. Besides, the manifesto makes it clear that foreign money will be welcome in practically every other industry.

The document also promises to cut red tape, expedite project clearances and make India an easier place to do business. The party's commitment to end "tax terrorism" will cheer telecom operator Vodafone, which has fought the Indian authorities for six years over a $2-billion claim. The BJP has also pledged fiscal discipline and said it will start a nationwide market in farm produce to deal with inflationary food shortages.

The party remains vague about banking reforms and made no mention of the long-pending plan to raise the ceiling on foreign investment in insurance companies to 49 per cent from 26 per cent. Another notable absentee from the manifesto was a commitment to restart privatisation, which came to an end when the BJP lost power 10 years ago. That coyness is easy to understand, though. Such a pledge would have been politically immature without first securing the backing of regional parties which are likely to form part of any BJP-led coalition government. Overall, though, Modi's message will also raise expectations that the election outcome can reverse the deterioration in the country's investment climate. If performance fails to strike equally high notes, Tesco and Carrefour won't be the only disappointed investors.