Can you blame India for gold passion?
India Coalition Government Collapses After Parliament Shows No
Confidence
India Coalition Govt Collapses; Loses Confidence Vote (Update2)
(Adds stock market close, more comments and background.)
New Delhi, April 17 (Bloomberg) -- India's ruling Bharatiya
Janata Party-led coalition became the third Indian government to
fall in as many years, triggering a stock market plunge and
concern that delays in reform and spending could hobble the
economy.
The government of the world's most populous democracy lost
a confidence motion by one vote, with 270 members of Parliament
voting against the motion, 269 voting in favor and one member
abstaining.
The Mumbai Stock Exchange Sensitive Index plunged 245.93
points, or 6.9 percent to 3326.98 as investors had expected the
government to survive.
The fate of the country's national budget as well as
important economic reforms -- including the opening of India's
insurance industry to foreign investment -- will be in doubt
until a new government is formed by a new coalition or early
elections, analysts said. They said any new coalition will
likely be as unstable as the last one.
''We will have a weaker government and the inherent
stability problem remains,'' that will hurt the economy, said
Mona Chhabra, an economist at the DBS-Capital Trust Securities
India Ltd. in New Delhi.
Prime Minister Atal Behari Vajpayee was forced to prove his
majority in the lower house of parliament after a key ally, the
All India Anna Dravida Munnetra Kazagham withdrew its support on
Wednesday to protest the firing of a Naval chief.
Next Steps
After Vajpayee tells President K.R. Narayanan that he and
his cabinet resign, the President will probably ask the Congress
Party to form a new government, analysts said.
''The ball is now in the President's court. He will now ask
the Congress party if it has the majority support to form a
government,'' said N. Bhaskara Rao, chairman of the Center for
Media Studies, a New Delhi-based think-tank.
Congress has the support of more than 142 members and needs
the backing of more than a dozen small parties to stake its
claim to form a government. The Congress party has ruled India
for about four decades since India's independence in 1947.
Congress and its coalition allies will then have to prove
their majority in the Parliament, said Rao. If it is not able to
do that the country will have to call early elections.
The possibility of ''mid-term elections still looms large
on the nation,'' said Rao.
Future Concerns
India needs more political stability and governments that
interfere less in the economy before its growth will accelerate,
analysts said.
India's gross domestic product has slowed to a gain of 5.8
percent in the year ended March, compared with an average growth
of 6.8 percent in the previous three years.
''The prospects of a real revival in the capital market
remain distant,'' said John Band, executive director of ASK-
Raymond James Securities India Ltd. in Mumbai.
Analysts said the creation of a government may lead to
delay or even changes in the budget for the year ending March,
2000. The political instability is also likely to hurt the
economic reforms program of the country as new parties get to
pick at the previous government's proposals.
''Since the left parties will play a bigger role (in any
alternative government), it will be difficult passing the
insurance proposals as well as privatization and reforming of
state-owned companies,'' said Chhabra.
The BJP-led government had planned to sell shares worth 100
million rupees ($2.3 billion) in state-owned companies in the
year ending March, 2000.
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