But what does the election result really mean for the business of law and the law of business in India? Alfred Romann reports
Compared with previous outcomes, India’s national election in mid-May was a landslide. The governing United Progressive Alliance (UPA), led by the Indian National Congress, walked away with 262 of 543 Parliament seats – just 10 seats short of an overall majority.
Congress alone won 206 seats. Regional parties Bahujan Samaj and Samajwadi, which together won 43 seats, quickly gave their support to the coalition, enabling the formation of a new government. Unlike the previous Congress-led government, the inclusion of the Communist Party was not necessary to achieve a majority in parliament.
The opposition – the National Democratic Alliance, a coalition led by the Bharatiya Janata Party (BJP) – was convincingly defeated. It won just 159 seats.
Observers had predicted a close race. Many feared the election would bring to power a shaky coalition, incapable of pushing through much-needed reforms. Others forecast the downfall of the Congress party. Among these prognosticators was the BJP’s Narendra Modi, chief minister of Gujarat. Arriving in Delhi just days before the result was announced, Modi confidently told reporters, “Obviously we are here to form a new government.”
The final outcome came as a surprise to many. The fact that a solid coalition had received an unusually strong mandate gave rise to high expectations of what the new government would be able to achieve. The cloud of pessimism that had had formed around the global economic crisis was lifted significantly at a stroke.
The following day, stock markets surged. Exchange traded funds and notes gained more than 20% as funds in the US jumped back into the market. Analysts now expect the benchmark Sensex index to rise to 19,500 points this year, up from around 15,000 in early June.
On 20 May, Manmohan Singh was appointed prime minister for a second term amid widespread acclamation. He is the first full-term prime minister to return to power since 1962.
During his first term, Singh’s reformist tendencies were frequently frustrated by his communist coalition partners. “There have been a number of changes that have lost steam in the last few years,” says Waajid Siddiqui, a partner at Washington-based law firm Hogan & Hartson.
Now, freed from his communist shackles and with a significant electoral mandate, a newly empowered Singh has much greater leeway to finish the economic reforms he began in the early 1990s during his tenure as India’s finance minister.
No turning back
The new government wasted no time setting out its list of priorities, many of which it intends to address in the first 100 days. They include plans to relax regulations on inflows of foreign investment; to introduce a central goods and services tax by April 2010; to equalize taxes at around 16% nationwide; to increase spending on public services; and to raise capital by selling minority shares in state-owned companies.