India heading for political crisis
The world’s largest democracy, India, with over 100 billion population, is heading for general elections in April / May 2009. The Indian public will elect their political leaders from across the 25 plus states and Union Territories, contesting from many strong regional parties.
The key trouble is that both the national level parties, namely Congress and BJP , are unlikely to get singular majority on their own. Thus, these parties have to take the support of few stronger regional parties, which in turn will force them to follow ideologically opposite policies in Business / international trade / social infrastructure spending etc.
All the other locally strong regional parties like AIADMK, DMK, Left front, RJD, SP etc. have many ideologies which do not gel with the liberalization policies followed in the last few years. And coalition with these parties for the sake of forming a government could be suicidal in the medium / long term.
And such weak coalition governments might force the foreign investors to pull out of India, which in turn might lead to collapse of the government itself.
Hence, for the foreign investors, it would be prudent to unwind majority of their current investments, and take a call on their India strategy, only after evaluation of the political equations at the end of May 2009.
