Manmohan, Mandate and the Market

Indians had barely recovered from the brilliance of what they had done in the recent Lok Sabha elections that they saw the stock market make another historic milestone- it was up by twenty percent before the half day mark and with the Sensex up more than Two Thousand Point it had to be closed because a circuit had come into play.

Yes it is euphoria and no one knows how long this will last but one thing is for sure, the Indian public has displayed a self-belief and a maturity that no one believed possible. Yes the Western Press covered our elections extensively, but most of it was around the sheer magnitude of the election. Of how operationally daunting such a task can be. But no one ever thought the Indian voter would go beyond (basically) caste, creed and past grievances and be “aspirational”.

The demure Singh from Punjab managed to work his magic and was voted back despite a down turn, a sixty per cent drop in stock market, job losses, inflation and a near miss with the Nuclear Deal and the CPI (M). His message of clean politics, consensual growth and putting professionals to work, clicked with the people. The margin with which the Congress was voted back does not merely say that people want to maintain the status quo, it says that they aggressively back a party that is focused on what it can do instead of mud-slinging and what it wants to prevent from happening.


The magic combination of Manmohan Singh and Sonia Gandhi works because while one is the product the other is the absolutely brilliant packaging- consistent, clear and with mass appeal. The good work done by the last UPA government needed to be taken to the people. This is what the threesome of the Gandhi family pulled off successfully. Coming from a legion of politicians they understood that it is not enough to do good- certain processes of a Lok Sabha election must be followed. People’s hand must be shaken, rallies must be held in villages, dust must be eaten and sweat allowed to flow.

The market’s reaction is saying that we had a belief in the India story all along- the fast growing youth population, the huge potential for infrastructure investment and hence returns, stable banking infrastructure- and now the last doubt of whether there would be a stable government or no has also been lifted so we will go and put our money behind India Inc. So now Manmohan Singh and Co, have to do what they all along have planned to do- be pro-growth, deregulate slowly but surely, continue the regulations that prevent the kind of irresponsible behaviour seen in the world’s financial institutions. And as for the foreign money flowing in- why will it not come to India? Where else will people invest? In the US and Europe everything that gets put in is swallowed up in recovery rather than new value creation. So money managers around the world will be happy to come to a country of a billion buyers who need new houses, roads, schools, factories bridges and are willing to borrow money and give returns.