SCENARIOS-Possible outcomes from India's general election
15 Apr 2009 20:16:21 GMT Source: Reuters
----------------------------------------------------------- (For full Indian election coverage click on [ID:nSP480764]) ___________________________________________________________ April 16 (Reuters) - India will hold a general election between April 16 and May 13, a mammoth process in which 714 million people will be able to cast their votes in the world's largest democracy. The main battle will be between the ruling Congress-led coalition and the main opposition bloc, headed by the Hindu nationalist Bharatiya Janata Party (BJP). Here are the possible outcomes of the election: CONGRESS-LED ALLIANCE: The incumbent United Progressive Alliance (UPA) led by the Congress party wins the biggest number of seats and forms a government. Investors are pricing in a UPA victory, so such an outcome would have little impact on stocks, the rupee or bonds. It is unlikely that UPA would win a majority of seats so it may have to rely on smaller regional parties, such as the Dalit-based Bahujan Samaj Party (BSP) led by the controversial Mayawati, who could become a power broker. Politicians like Mayawati could try and negotiate for senior ministerial posts, including the office of prime minister. Expect days of backroom deals and uncertainty with this scenario. Reforms and much infrastructure spending have stalled under the outgoing Congress government. But if Congress can form a coalition without communist support, the party may have a freer hand to step up reforms, such as a relaxation of labour laws. CONGRESS-LED ALLIANCE WITH COMMUNIST SUPPORT: If the UPA falls short of a majority of seats, it may have to rely on support outside the coalition from the communist parties that propped up the government from 2004 to 2008. This time its former leftist allies, who withdrew support from the coalition over a civilian nuclear deal with the United States, may be hesitant about backing the government once again. They could set tough conditions, such as a reworking of the nuclear deal, to prop up Congress again. News of communist support for the government in 2004 saw stocks plummet more than 5 percent. The rupee hit a 6-month low. The communists also blocked economic reforms. BJP-LED ALLIANCE: The National Democratic Alliance, led by the Hindu-nationalist BJP, wins the biggest number of votes. Again, it could have more than 50 percent of seats or be dependent on a tie up with a regional party. A win for the BJP, which has traditionally been more pro-market, could see some kind of market rally. Its last 1998-2004 rule saw reforms in the financial sector, stake sales in state firms and steps to reform public finances. Japanese brokerage Nomura says the likelihood of a post election equities rally is small unless the BJP or Congress wins overwhelmingly. The rupee should appreciate to 49.0 against the dollar, from around 50 rupees, by the end of the second quarter if a stable coalition of the BJP or Congress is formed. Again much could depend on how they cobble together a majority in parliament with regional parties, and what kind of policy or ministerial compromises the BJP would need to make. THIRD FRONT: If the UPA and the NDA fail to cobble together a coalition -- or between them win less than half the total number of parliamentary seats -- then a loose alliance of smaller parties known as the Third Front could win power. Chief among them are the communists, who thwarted several pro-reform policies of the UPA. They have strongholds in three Indian states, where they usually win enough seats to hold the balance of power in a hung parliament. The Mayawati-led BSP or the Samajwadi Party, based in populous Uttar Pradesh state, could also play a major role. The parties would choose a prime minister after post-poll negotiations. Market watchers believe a Third Front win could pull down stocks between 15-30 percent. The last time India saw a similar outcome, in 1996, the government lasted only two years and saw two prime ministers come and go. With this scenario, it is likely most reforms will be stalled, and many investors fear a wave of populist spending. (Reporting by Rina Chandran and Surojit Gupta; Editing by Alistair Scrutton and Alex Richardson)
A victim of a bomb blast arrives for medical treatment at a local hospital in Charsadda, a town near Pakistan's main northwesten city of Peshawar, April 15, 2009. A suicide car-bomber ...
