Foreign financial institutions (FIIs), which control India’s stock market, have already pumped in billions of dollars in the secondary market ever since BJP named Narendra Modi as their prime ministerial candidate. They had bet about another $ 400 million in equities and bonds on Friday morning as the voting trend showed a clear mandate for BJP and NDA, are certainly aspiring to play a big role in the formulation of the new government’s economic policy and its foreign direct investment (FDI) priorities, including multi-brand retail, defence hardware manufacturing, energy production, real estate development, telecommunication, e-tailing and infrastructure. The new prime minister is unlikely to disappoint them. The massive election mandate for him and his party will make task of the new government easier in bringing about radical changes in investment and economic policies to retain the current buoyant sentiment of the market and overseas investors.

The incoming prime minister and his economic think tank are believed to be looking at an astronomical trillion-dollar investment target to change the country’s industrial and social infrastructure to help nearly double the country’s GDP by 2020. This will require not only a massive sustained inflow of foreign funds both in existing and new projects and but also in trade, wholesale and retail, commerce, banking and services to drive the overall expansion of the economy. Therefore, a whole lot of changes in the policies and rule books will have to be incorporated providing a lot more freedom to investors in their respective areas of business. The problem of land acquisition and environment clearance that held hostage over-Rs.5,00,000-crore projects under the non-performing UPA-II regime need to be solved to free the pending investments and allow the new ones.

The task is easier said than done. First of all, the new prime minister will have to find a finance minister who will fully back his economic agenda. Rajya Sabha member Arun Jaitley appears to be most suited for the job. BJP president Rajnath Singh too can foot the bill. The new prime minister will also have to pick up cabinet colleagues with highly positive attitude to head economic ministries, including industry, commerce, agriculture and fertiliser, power, petroleum and chemicals, telecommunications, surface transport and civil aviation. Persons of the calibres of Ravi Shankar Prasad, Anant Kumar, Suresh Prabhu and Prakash Jawadekar are expected to do well as economic ministers in his government.

The new prime minister will need the full support of non-NDA state chief ministers to ease the land acquisition and environment clearance hurdles, ushering in a new chapter in centre-state relations and co-operation. He may have to walk an extra mile to build a good working relation with Tamil Nadu’s Jayalalithaa, West Bengal’s Mamata Banerjee, Maharashtra’s Prithviraj Chavan, Uttar Pradesh’s Akhilesh Yadav and Orissa’s Naveen Patnaik, all bitter political rivals, to fulfill his infrastructure dreams. These five non-BJP states hold the key to the success of projects such as roads, ports, power generation and transmission, telecommunication and mining. West Bengal, an important gateway to the east bordering Nepal and Bangladesh, should assume a special position in the new prime minister’s scheme of things for the north-eastern region where his party achieved, for the first time, a record performance.

Among the sectors that have been most bullish by the market reckoning since Tuesday are: automobile, banking, consumer durables, FMCG products, healthcare, infotech, oil and gas and metal. Predictably, Adani Enterprise, Reliance Capital, Hindustan Development, India Bulls, GVK Power & Infrastructure, JP Power, NTPC, Sesa Goa and Reliance Industries have made big gains. Both Sensex and Nifty indices created highest-ever intra-day records by breaching the psychological levels of 25,000 (25,375.63) and 7,500 (7,563.50) respectively. However, quick profit taking brought down both Sensex and Nifty by several hundred points at the close. That was expected. While the 10-year bond yield hit a record three-month low – seven basis points at 8.71 per cent – Rupee gained further by 43 paise to improve the exchange rate to Rs. 58.87 for a US Dollar. The bond auction outcome was $3.38 billion. Gold was down by nearly Rs. 300 per 10 gram. The lower bond yield, cheaper gold and Rupee appreciation point at strong investor confidence in the BJP-led government.

During his election campaign, BJP’s prime ministerial candidate promised that if his party came to power, there would be “less government and more governance.” The slogan was the single largest motivator of investors’ confidence. Now, it is for the new prime minister to deliver and live up to the investor’s big expectation. (IPA Service)