Industry Glum On Hung House, Seeks Early Budget

The Indian industry has expressed disappointment at the lack of a clear majority for any party in the Lok Sabha elections and is set to push for an early budget exercise, hounded by fears that further political instability may affect the process of economic recovery.

The industry, which has resigned itself to yet another mid-term poll within the next two or three years irrespective of the coalition that forms the government, says that an early budget presented by the new government should clearly define its immediate economic agenda and policies. Growth-oriented policies should also be outlined to reverse the industrial downturn.

The budget is the flagship annual event of an economy, as it either stimulates or depresses demand and investment. There is very little maneuverability in terms of the economy, which has been very badly down for the last few months. The industry will push for an early budget to stimulate the domestic economy, irrespective of the party that comes to power, said Tarun Das, secretary general of the Confederation of Indian Industry (CII) at an interactive press meet yesterday.

This was corroborated by CII president N Kumar, who said that given the backdrop of the last 22 months, which saw an unstable government being unable to implement some important policies (insurance and companies bills), it is imperative that the new government immediately announce its economic agenda.

With the inherent instability of a coalition government, the economic recovery is unlikely to begin in the next six months to a year, said Subodh Bhargava, chairman, Eicher, reflecting the view of most of the industrialists present at the meet.

The economic instability will continue for some time at least, with some coalition or another continuing to form the government, said Bhargava, reflecting a clear consensus that irrespective of which coalition came to power, the new government would not last its full term.

We were hoping against hope that a somewhat clear majority would have emerged. But there seems to be a hung Parliament once again, said CIIs president Kumar. Since the present numbers do not add up in favour of any single party or alliance, it will lead to a coalition government.

The resulting heterogeneous ideologies that would come to power will neither accelerate growth nor investment. I personally believe that such a government will not be able to serve a full five-year term, resulting in mid-term polls, he added. We are staring at elections in two years time, said Vinod Doshi, chairman, Premier Automobiles Ltd.

Some industrialists also expressed fear that the anti-government votes in the states of Orissa, Andhra Pradesh, and Haryana which led to poll reversals for pro-reform political leaders like Chandrababu Naidu, JB Patnaik and Bansi Lal might put a question mark over the success of economic liberalisation-led politics.

One of the most worrying thing of these elections is that two or three political leaders who were pro-reform are losing. This might slow down the reform process initiated by others leaders, said Dhruv Sawhney, chairman and managing director of Triveni Engineering and Industries, pointing out to the victories notched up by governments that had resorted to populist policies.

While some like V K Mathur, chairman and managing director of Inapex Ltd, expressed fears of a slow down in foreign direct investment inflows into the country as a result of the continuing uncertainty on government formation, the CIIs Tarun Das maintained that FDI will remain unaffected. The feedback from our 12 international offices has shown that the investor confidence has not been affected and that FDI will continue to increase steadily.