New Delhi, April 20: Foreign investors and analysts keenly watching India’s general elections are laying greater emphasis on the fractured nature of the coalition government that may come to power and its ability to bring about economic reforms, rather than which political party forms the new ruling alliance.
Rating agency Standard & Poor’s believes that a large and unwieldy coalition may lead to “incoherent policies”.
“We believe that the current political landscape in India suggests that no single party could win an outright majority,” said Standard & Poor’s sovereign credit analyst Kim Eng Tan.
“An important factor is how fragmented the government will be. The more parties involved in the next coalition government, the more likely policies will be incoherent and less supportive of credit attributes.”
S&P, which has earlier threatened to downgrade India, has come up with two reports titled “India’s election is pivotal for its sovereign creditworthiness” and “The new government’s reform policies will be critical to the credit profile of Indian corporates and banks.”
India’s 16th general elections, where more than 800 million people are eligible to vote, are underway.
Despite various sample polls predicting results, the niggling fear in investors’ minds is the nature of coalition that may be formed. Potential partners such as Mamata Banerjee’s Trinamul Congress, Left parties and Jayalalitha’s AIADMK could create pressures on economic reforms, which the two major parties — the Congress and the BJP — may want to bring in.