Fear and Cheer on BJP’s Victory

The paradox of the Indian business scene today is that the Bharatiya Janata Party’s electoral victories have been cheered resoundingly on the stock market, while many businessmen are fearful of the government.

But the stock market-evidently reflecting foreign institutional as well as domestic investor enthusiasm – has no fear, only hope.

What businessmen would like, one hears often, is for the Narendra Modi government to return after next summer’s election, but as a minority, and therefore in need of coalition partners who might put brakes on any high-handed action.

Most Indian businessmen were never great votaries of globalization.  Yet businessmen prefer the Modi government because it has taken several steps that are business-friendly: The corporate tax rate has been lowered, and tariff and non-tariff protection is being given to domestic producers against imported competition. Indirect taxation has been reformed, subsidies are being offered for investment, and incentives for increased production. And there is unprecedented public investment in the physical infrastructure. What’s to criticize?

What businessmen seen the Modi government offering are stability and continuity. No one wants a repeat of the chaos of past coalition governments or the policy paralysis of the later years of the Manmohan Singh government. Whether there is less “tax terrorism” now than under Congress rule is possibly an open question, but there is also another factor.

The current Congress message offers primarily welfares and freebies, translated to mean fiscal irresponsibility. The party offers no accompanying pro-business message.

The point is that businessmen look to prosper; what they seek to minimize is uncertainty. Which denote risk.