‘Political uncertainty a bad omen for economy’ (Lead)

July 8th, 2008 - 7:46 pm ICT by IANS  

A file-photo of Manmohan Singh
By Rajeev Ranjan Roy
New Delhi, July 8 (IANS) The current bout of political uncertainty in India could not have come at a worse time, with experts fearing that the fluid political situation will not help in checking inflation. Experts feel the government has not been able to concentrate on the economic situation arising out of zooming inflation that hit a 13-year high of 11.63 percent for the week ended June 21.

The Communist Party of India-Marxist (CPI-M)-led Left Front Tuesday announced the withdrawal of support to Prime Minister Manmohan Singh’s government over the India-US civilian nuclear deal.

The Congress led United Progressive Alliance (UPA) is now banking on the support of Samajwadi Party (SP), which has 39 members in the Lok Sabha, to complete the remainder of its five-year tenure.

India’s inflation rate has shot up by over three percent since the week ended May 17, when it was at 8.10 percent, and continues to maintain an upward swing.

“If the political uncertainty persists, the government will be faced with a compounded inflationary situation marked by an overall slowdown in the economy,” said Rajesh Jaiswal, associate fellow at the National Council of Applied Economic Research (NCAER), an economic policy think-tank.

“The capital market is already paying a price with the Sensex (30-share BSE sensitive index) maintaining a fluctuating trend. It is not a healthy sign,” Jaiswal told IANS.

D.H. Pai Panandikar, director of RPG Foundation, another think-tank, agreed with Jaiswal.

“Political uncertainty is certainly creating problems in the capital market,” Panandikar told IANS.

Indian equity markets June 4 recorded their seventh consecutive week of decline due to rising crude oil prices, inflation worries and political uncertainty. Out of the five trading sessions last week, three ended in the negative.

Panandikar, however, claimed that the Congress-led government with the support of the Samajwadi Party (SP) would be more effective in accelerating the growth process than a regime backed by the Left parties.

“The communists have blocked the process of economic reforms, and did not allow Prime Minister Manmohan Singh’s government to initiate any key policy steps,” he said.

“The India-US nuclear deal is a case in point. The country needs energy to boost economic growth and have a competitive edge over rivals. But the Left leaders are blindly opposing the deal,” he added.

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