An important signal, but reforms have already begun: Mark Mobius

The state election results have garnered a lot of interest, as they are seen to be indicative of the national elections in April-May 2014. As long as people give a clear mandate to a single national party, I think India will do extremely well. But if the national election results throw up a fragmented hotchpotch, then we will continue on the beaten path. It seems from the state polls that the Bharatiya Janata Party is a clear winner, trending even better than the pre-election surveys.

The results have shown the importance of leadership in securing the interest of a state and pushing forward governance at the state level. State leadership has now started playing a more important role in setting the national agenda and the federal structure of the nation is blossoming. Parties which recognise the importance of providing good governance, remain corruption-free and recognise the importance of the federal structure will tend to do well. There can be no doubt that it is important to have stable, good and effective governance for the overall investment climate to improve. However, in the past few months a lot of reforms have already started to occur which probably are equally important and, in some ways, would insulate the economy from politically adverse results. Many institutions have now become more independent, with judicial and parliamentary backing.

These institutions form the basis of a regulatory environment, critical for business to flourish in any economy. Other reforms have been seemingly forced by the economic situation, driven by the state of government finances and the commitment of the government to stick to a fiscal target and fiscal discipline. The fact that such steps have been taken, and there has not been too much protest regarding these is positive. Thus the elections are an important signal but change has already begun in earnest.

Mark Mobius,
MD, Templeton Asset Management