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India's Gandhi to claim power as market recovers
(Agencies)
Updated: 2004-05-18 14:08 India's Italian-born prime minister-elect, Sonia
Gandhi, is due to claim power on Tuesday as markets rebounded sharply after
their worst day in history.
Sonia Gandhi greets
Congress supporters following her stunning electoral victory.
[AP] | Markets rose more than six percent in early trade, after shares fell as much
as 17 percent on Monday on fears communist parties, which Gandhi needs to rule,
will slow or block reforms.
Indian President Abdul Kalam has invited Gandhi for a meeting but no time has
been set, a presidential spokesman said. Kalam, a titular head, is likely to
accept Gandhi's claim to lead the world's largest democracy because there is no
other contender.
After days of frantic deal-making, the heir to the Nehru-Gandhi dynasty has
won the backing of more than 320 members of the new 545-seat lower house of
parliament.
But the refusal of the powerful leftists to join her has raised questions
about the new government's stability.
A renewed campaign by the defeated Hindu nationalist Bharatiya Janata Party
targeting Gandhi's foreign origin added to the uncertainty over whether she
would accept the top job.
Reports Gandhi might step aside for a compromise prime minister to win over
leftists were dispelled when her party and allies said she would meet Kalam on
Tuesday and be sworn in as India's fourth leader from the Nehru-Gandhi dynasty
the next day.
"We salute her. Sonia Gandhi is treading this path very carefully," said key
ally Laloo Prasad Yadav.
Trading was suspended twice on Monday before the key Bombay index closed 11
percent down, extending losses that have wiped more than $30 billion off the
value of India's listed companies over three weeks. The rupee and bonds also
fell.
"Ground Zero," the Times of India said in a banner accompanying an image of
the Bombay exchange towers on fire with a plane with communist hammer and sickle
markings slamming into the building.
MARKETS REBOUND
Bonds edged up early on Tuesday.
The Reserve Bank of India is due to announce its annual monetary policy for
2004/05 (April-March) around noon (0230 EDT), and traders and analysts widely
expect it will hold interest rates steady at three-decade lows.
Traders are hoping authorities will try to maintain as much of a status quo
as possible until the newly elected government takes office and spells out its
economic priorities.
Leftist parties, with more than 60 of the new parliament's seats, decided not
to formally join a coalition headed by the 57-year-old widow of former prime
minister Rajiv Gandhi, stoking uncertainty among investors and worsening the
market slide.
But the decision was not surprising because the leftists compete directly
with Congress in their state bastions. They also bitterly oppose any return of
the ousted Hindu nationalists, which would be the inevitable result if Gandhi
falls.
So they have pledged to support her from outside and will likely vote with
Congress on most issues, including confidence motions, and help draft a joint
economic blueprint.
Investors are afraid the leftists, led by the Communist Party of India
(Marxist), the third largest party in parliament with 43 seats, will block or
slow key reforms in Asia's third-largest economy, especially the privatization
of bloated state firms.
Congress' Manmohan Singh, father of India's economic reforms more than a
decade ago, stepped in quickly to reassure investors.
"We will persist with the reform package... which strengthens the climate for
enterprises in our country, promotes savings and at the same time is seen to be
addressing the problems of agricultural stagnation, problems of jobless growth,"
the turbaned, white-bearded 71-year-old told Reuters.
A few hours earlier, his new communist allies were still demanding extra farm
subsidies, the return of some import restrictions and the axing of the
privatization ministry.
But Communist Party of India leader A.B. Bardhan also said the Left would
support some stake sales in state firms.
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