Indian Markets Surge on Congress Party Victory

Today, the Indian stock market had to suspend trading as it soared by over 2,000 points -- more than 17 percent -- on the news of the Congress Party’s victory in the recent Indian Parliamentary elections.

Indian Markets Surge on Congress Victory.
http://www.ft.com/cms/s/0/ce840dc6-436f-11de-a9be-00144feabdc0.html?nclick_check=1

The unprecedented surge in the markets was brought on by the overwhelming support for the Congress party in India’s recent parliamentary elections. In contrast to the US, which effectively has a two party system, India has a mutli-party system and in most cases one party does not win enough seats to hold a majority of seats with which to rule. This year, the Congress Party, India’s oldest political party -- the party of Nehru and Ghandi -- has done phenomenally well and while not holding an outright majority, will only have to work with a few small minority parties in order to get majority control.

Curtis, et. al, explain in Chapter 10, pp. 556 – 564 the history and characteristics of this historical party. They tell us the Congress Party dominated India’s first 30 years of independence, that they then lost hold of their power in 1977, but that after the assassination of Indira Ghandi, her son Rajiv called for elections and was able to win a massive majority for the Congress Party once again (p.558) Due to problems with corruption in the Congress Party-run government, and better coordination of opposition groups, in the 1989 election, Congress was unable to withstand pressures from opposition groups and was unable to “command a working majority.”

Part of what makes the Congress Party so interesting is that it is very much a family legacy. As Curtis et al tell us on page 560, Sonia Ghandi ran for election on a slogan “Tried, Tested, and Trusted.” It is believed she is grooming her son to take over in the coming years. While in the US we have seen “family dynasties” such as the Adamses, Roosevelts, Kennedys and the Bushes, we do not have any kind of family dynasty to rival the Ghandi dynasty and their hold on the Congress Party.

Reports show in the recent election, “the Congress-led United Progressive Alliance had won 262 of the 543 parliamentary seats, confounding predictions of an inconclusive poll producing a weak coalition.”

http://topics.nytimes.com/topics/reference/timestopics/people/g/sonia_gandhi/index.html?inline=nyt-per

The Congress Party held a tenuous control over Parliament for the past five years, but the coalition it had to put together in order to rule was difficult to maintain and manage, and depended on a diverse collection of parties, including the Communist Party.

Part of the reason for Congress’s surge in popularity is due to the support of rural voters. Curtis et al., tell us on page 540, that “in cultural life and social structure, India is closer to the classic model of traditional societies” than a modern society. Most of the rural voters are poor agrarian workers (over 60% of the Indian workforce is engaged in agriculture -- p.553) and many if not most are illiterate. The Congress Party has made great inroads with this portion of the electorate over the past five years chiefly through increased spending on social spending and welfare programs.

At the same time the average poor worker is elated, the business community is also excited by the country’s vote for stability in voting in the Congress Party and the continued leadership of Prime Minister Manmohan Singh. James Lamont of the FT believes the markets are looking forward to economic reforms, perhaps in the way of some privatization, to come out of the new government.
Carol Starmack