Reforms Will Continue, Pace May Change

Whichever party forms the government at the centre, economic reforms is likely to continue as every new government will try to outdo its predecessor in pushing through as many reforms as possible.

Top corporates across the country felt the current political turmoil is bad for the countrys image but will have no long-term impact on the economy.

We have found more reforms taking place during times of weak, minority governments as they set out to prove their predecessors wrong. Also, economic policies of most parties are more or less the same, says Anand Mahindra, managing director of the Rs 2753.57 crore tractor and auto major, Mahindra & Mahindra Ltd.

Adds Prashant Ruia, director of the Rs 6,000 crore Essar group, Politics, these days, is separate from economics. The budget will be passed, and the political developments will have no impact on economic policies.

Even if theres another coalition between the United Front and the Congress, the reforms and policies are likely to continue. However, some semblance of political stability is essential to retain foreign investor confidence and sustain domestic consumer demand.

Apart from domestic growth potential, foreign investors also look for political stability. If thats absent, investors are likely are postpone investment decisions.

It will certainly have a negative impact on foreign direct investment as foreign investors look for a strong government that can give the economy a clear direction, says H Khusrokhan, managing director of Glaxo India Ltd

An immediate impact is expected in the global equity and debt offerings being planned by several domestic companies. The public sector undertaking, Bharat Petroleum Corporation Ltd, (BPCL), has already deferred its Rs 412 crore public issue. Other companies are also likely to follow suit, and turn to other avenues like term finance and retail debt.

Companies will also have to delay their Euro issues as political uncertainty might scare away prospective investors. However, I dont see any slowdown in export growth, says Arun Mehta, managing director, Varun Shipping Company.

Harsh Goenka, vice-chairman, RPG Enterprises, says,I am told that there is a patch-up taking place. If the patch-up happens fast, there will be no problem.I am glad that the budget is being passed.It is a positive step.

However, if uncertainty continues for too long or if the parties dont agree on a government soon, the consequences, warn some industrialists, will be disastrous.

The political uncertainty is causing enormous damage to economic development. I hope the political leaders form a coalition government, which, under the existing circumstances, would be better than holding fresh elections and ending up with more or less the same scenario, says H F Khorakiwala, chairman and managing director of the Rs 234.62 crore pharma major, Wockhardt Ltd.

Goenka adds, We cannot afford another election.