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Frustrated India investors cheer opposition gains

December 9, 2013 7:03 AM
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Business leaders are openly cheering on the BJP. Several surveys show overwhelming business support for its prime ministerial candidate, Narendra Modi, reflecting widespread frustration with the ruling Congress-led government’s failure to end extravagant corruption and scythe through a thicket of bureaucratic red tape that has stifled investment.

India’s economy has slowed from an average 8 percent growth over a decade to less than 5 percent in the last year, too slow to alleviate the poverty affecting hundreds of millions of people or provide enough jobs for its swelling population.

Investors hope the BJP can do better, given an earlier incarnation as a government that opened markets. They are especially banking on Modi’s reputation for promoting the western state of Gujarat, which he’s led for 12 years, as an industrial haven.

A BJP victory in the elections due by May might also be welcomed abroad. South Korea’s POSCO has been trying to advance plans for a $12 billion steel plant in Orissa state since 2007 and giant U.S. retailer Wal-Mart recently dropped plans to open stores in India because of onerous local product sourcing requirements.

Enthusiasm for the BJP has not been dimmed by recent moves at odds with its pro-business reputation.

The party led street demonstrations last year against opening up India’s huge but underdeveloped retailing industry to foreign investment. A BJP lawmaker recently asked the Supreme Court to block Etihad Airways deal to buy a 24 percent stake in Indian carrier Jet Airways.

Even Modi’s government in Gujarat this year irked solar power companies by trying to cut their promised fees.

Before the party lost power in 2004, it had long been seen as India’s main business-friendly party compared with the left-leaning Congress. The BJP once championed the reforms it railed against recently and investors believe it will flip back to supporting them if it returns to office.

In India’s fractious politics, “the job of the opposition party is to oppose whatever the ruling party is doing,” said political analyst Sanjay Kumar.

The Congress-led government last year eased restrictions on foreign investment in retail and aviation, hoping to revive growth. But it also dismayed businesses by passing land rights and environmental protection laws that make it harder to obtain land for factories and mines.

Modi’s campaign has pushed his business-friendly credentials, emphasizing a reputation for rolling out the red carpet for business, not red tape, under his leadership in Gujarat. The state’s economy has grown more than 9 percent a year since 2011 even as the country’s growth waned.


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