Randomly Noted

How optimistic should one be about India in the wake of the Congress Party-led government coalition’s electoral success? Very, I say. But DJN colleague Ros Mathieson argues the United Progressive Alliance coalition has been “patchy when it comes to acting on promised reforms.” Among the UPA’s “unfulfilled promises ” Ros includes failure to open the banking sector to foreign direct investment or to allow pension funds to invest in the stock market.  Fair enough. Have a look at her “Money Talks” column this morning for more: “MONEY TALKS: India Govt May Not Capitalize On Reformist Mood”

My view remains: the election results giving the Congress Party a clear mandate will help ensure a high degree of stability and clarity for India at a crucial moment: A return to the fast-paced economic growth of the past several years hangs in the balance. Moreover, once the recent growth levels are restored, new structures need to be in place to let India’s economy soar. A Congress Party with renewed confidence based on popular support – and less beholden to its UPA allies - can now implement the changes India needs. Growth-stifling regulatory, legal and bureaucratic impediments exist at every level of commerce, trade, finance and government. The FT quotes Subir Gokarn, S&P’s chief economist for Asia Pacific, as saying of Comgress: “They were doing nothing [with reform] for five years. Now the accountability will be greater. They were hamstrung by a coalition but they can’t use that [as an excuse] any longer.”The rupee is strong today in Asia, lately at 48.46 (USD buys 48.46 rupees.) Dow Jones’s Asia CommentaryPlus analyst Mark Cranfield advises selling USD/INR, targeting a fall to 47.95, which is January’s low. Mark cites Nomura and Goldman Sachs, with the latter predicting pension, insurance and banking reforms will be “back on the agenda,” all benefiting the rupee.  Goldman and RBS expect USD/INR at 46.00 in 12 months and sees “upside risks” to its GDP forecast of 5.8% in the current fiscal year – meaning India’s economic growth might be better than Goldman’s forecast.