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India's Stock Markets Crash over BJP  Election Results - 2004-05-02

India's stock markets crashed this week as exit poll predicted that the ruling Bharatiya Janata Party-led coalition might not get a parliamentary majority. India is in the middle of a staggered, three-week general election that ends May 10.

Promises by the ruling Bharatiya Janata Party to speed up the pace of economic reforms, open the country to more foreign investment, and privatize several public sector industries had boosted Indian business sentiment before elections began.

But Indian markets lost more than four percent in the last week after exit polls projected that Prime Minister Atal Behari Vajpayee's BJP-led coalition might not win a majority in parliament. Shares prices of state-owned firms dropped the most.

Business analysts say the prospect of a hung parliament has triggered fears that India's next government may need support from socialist and small parties who oppose the reform program.

Market analyst Rajesh Jain at Pranav Securities says implementing reforms such as privatization and flexible labor laws are necessary for India's economic expansion.

"The economy at large and business in particular is hoping for continuation of the liberalization that was triggered off ??in 1991 and which has been carried forward with much more speed? in the last three or four years by the Vajpayee government, and these policies are greater freedom to private entrepreneurship, complete focus on infrastructure," he said.

The BJP has also promised to support the country's booming technology sector, emerging industries such as bio-technology, and traditional manufacturing industries where India has begun making a mark, such as pharmaceuticals and engineering goods.

All this was expected to further push India's estimated sizzling eight percent growth in the last fiscal year that ended in March. The economy is expected to continue doing well, but analysts say some momentum may be lost if there is political instability. The results of India's election will be counted on May 13