New Delhi, March 7
The budget for fiscal 2012-13 will be the first test of the fallout of the elections outcome on whether the government will bite the bullet on reforms or become populist, say analysts. Many feel that the government's job has become harder and are concerned about growing political uncertainty.

According to a JP Morgan research note, the outcome of the much-anticipated state elections in India resulted in severe disappointment for the ruling Congress party.” All of this is expected to significantly reduce its leverage at the federal level, and potentially threaten efforts to undertake much-needed fiscal consolidation and policy reforms”, it said.

It says fears have also risen that the heightened political-instability, post polls, will eventually culminate in a midterm general election.” While the risks of a mid-term election have risen sharply, we still do not consider it the baseline, in light of significant underperformance by the principal opposition party (BJP) as well”, it adds.

However, the first test of how election results will influence policymaking will be on offer during next week’s annual budget. According to JP Morgan, a bold, reformist budget would suggest that the government is intent on biting the bullet. However, as appears more likely, a budget that dodges politically-difficult decisions, would suggest policymaking might be constrained to adopt the path of least resistance from here on.

Kotak Equities is of the view that the Congress party’s weak performance of may raise fresh challenges for government in its future approach to economy and politics and create more uncertainty for the markets. The markets are less hopeful about the future of reforms after the verdict, it says.

According to a Prabhudas Lilladher report, post these results not only would the TMC continue to torment the Congress party’s reformist agenda but the SP, which till now has been a silent, undemanding supporter to the UPA2 from the outside, could very well queer the pitch by putting more onerous demands. It is of the view that the policy drift in New Delhi is likely to continue and the urge to push through reforms aggressively in the face of opposition from allies and opposition may continue to take a backseat.

Given the Congress party’s reduced leverage after today’s results, JP Morgan is of the view that the worry now is threefold. Firstly there are concerns that any reform that is politically-sensitive and was blocked by the Congress party’s allies will not see the light of day.

Also, the results might force the ruling coalition to veer towards more populism, and efforts at fiscal consolidation may not materialize forcing the RBI to keep rates high and lastly that the results have significantly strengthened the hands of key regional parties and will result in heightened political instability at the centre culminating in a midterm poll.

Mumbai, March 7
The Bombay Stock Exchange Sensex fell for a third straight session on Wednesday, led by market bellwether Reliance Industries, as a poor election result for the country's ruling Congress party appeared to pour cold water on an already-struggling reform agenda.

The Congress party’s flop at the ballot box in Uttar Pradesh, India's most politically vital state, has hit hopes of renewed efforts to re-launch reforms and reverse a slowdown in growth, as the markets await the annual budget this month.

"The market has lost quite a lot of value and today we saw that it is largely confused on the trend going forward, as we look towards the budget next week," said Deven Choksey, chief executive officer at KR Choksey Shares & Securities in Mumbai.

The government is set to unveil the annual budget on March 16, and investors will look for commitment on a string of key economic reforms from a government that has been hamstrung by corruption scandals and coalition dissent over the past year.

The benchmark 30-share BSE index closed down 0.16 percent at 17,145.52, with all but 13 of its components in the negative territory. The index has slipped 7% since February 21. — Reuters

New Delhi, March 7
Prime Minister Manmohan Singh on Wednesday asked a group of ministers to "urgently" review next Friday the decision to ban cotton exports, which Agriculture Minister Sharad Pawar said was taken without his approval.

Commerce Minister Anand Sharma, whose ministry on Monday issued a notification banning exports of cotton, on the other hand defended the move saying it a "judicious and considered view taken" and he will speak to Pawar to allay his concerns.

Pawar had on Tuesday raised a strong objection to the export ban, saying he was "kept in the dark" on the issue.

"The prime minister has given directions that a group of ministers (headed by Finance Minister Pranab Mukherjee) should review this decision urgently on March 9," a PMO statement said today.

The ruling Congress party's Maharashtra and Gujarat units opposed the move when they met the Prime Minister on Wednesday.

The decision was also opposed by cotton growing states like Gujarat. State Chief Minister Narendra Modi had written to the prime minister seeking revocation of the "anti-farmer" move.

Meanwhile, Sharma, who is on an official visit to Ho Chi Minh City, Vietnam, said it was a "judicious and a considered view taken", to boost domestic availability.

Sharma, who also has textiles portfolio, said he was not able to contact Pawar, who was traveling abroad, but had directed the textiles and commerce secretaries to brief the agriculture minister about the ban.

"I had left a note on Saturday night for Pawar since I was not successful to speak to him over the phone. We’re one government, we all are ministers in the same government," he said, adding Mukherjee had also been fully apprised.

"The group of ministers will meet soon upon my return (on March 9). I’ll be speaking to the agriculture minister in person...The prime minister has been kept fully informed of all these developments," Sharma added.

On Tuesday Pawar had said that "they (commerce and textiles ministries) kept me in the dark" and he came to know about this only after a notification was issued.

"While taking such a decision, it is always proper to discuss it in the cabinet committee on prices or in the cabinet committee on economic affairs as is done with wheat, rice, sugar. So, I have raised this issue with the prime minister. This is highly objectionable," Pawar had said. — PTI

London, March 7
Despite "impressive" achievements in various sectors in recent years, India is unlikely to be a superpower and in fact, should not aspire to become one, a study by the London School of Economics has concluded. The study, titled India: The Next Superpower?, recalls and dismisses US Secretary of State Hillary Clinton's statement made during her visit to India in 2009 that "I consider India not just a regional power, but a global power".

The LSE study comprising essays by nine experts in the areas of India's economy, defence, government, culture, environment and society advises "caution in assessing India's claim to superpower status".

Ramachandra Guha, currently the Philippe Roman chair in history & international affairs at LSE, argues that it is doubtful whether India should seek to become a superpower. He cites seven reasons why India will not become a superpower.

These are: "The challenge of the Naxalites; the insidious presence of the Hindutvawadis; the degradation of the once liberal and upright central government; the rising gap between the rich and the poor; the trivialization of the media; the unsustainability, in an environmental sense, of present patterns of resource consumption; the instability and policy incoherence caused by multiparty coalition governments", he writes.

Listing India's several achievements that prompted predictions and ambitions in some quarters about India being the next superpower, the study goes on to discuss several challenges that are likely to prevent India from realizing such ambitions.

It says: "Still, for all India's success, its undoubted importance and despite its undisputed potential, there is cause for caution in assessing India's claim to superpower status. India still faces major developmental challenges. The still-entrenched divisions of ‘caste’ structure are being compounded by the emergence of new inequalities of wealth stemming from India's economic success".

The study adds: "India's democracy may have thrived in a manner that few ever expected, but its institutions face profound challenges from embedded nepotism and corruption. India's economic success continues to come with an environmental cost that is unsustainable".

Moreover, the study says India has pressing security preoccupations, but sees the country continuing to play a constructive international role. "(It) certainly has a soft-power story to tell as a model of liberal political and economic development.

The study concludes: "Yet the hopes of those in the West who would build up India as a democratic counterweight to Chinese superpower are unlikely to be realized anytime soon". — PTI

Mumbai, March 7
The Reserve Bank today said it expects banks to use credit bureaux information not just for retail borrowers but equally for corporates also.

"Commercial banks are increasingly using information from the credit bureaux to extend loans to retail investors more in comparison to corporates.

"The impression, we have sometime back is that this is used actively for retail and not so much for corporates," RBI deputy governor Anand Sinha told a meeting organized by Credit Information Bureau (India) Ltd (CIBIL).

Noting banks are using credit bureau information for lending to retail investors, Sinha pointed out this was less used in case of corporate accounts now. He asked these bureaux to furnish timely and accurately for greater relevance. "The data should be furnished timely and accurately."

Sinha expressed the hope that going forward, banks would do a better balancing act. "Now there are three more credit information companies. I’m sure, situation will definitely improve."

Referring to creation of unique customer identification numbers, Sinha said the central bank was considering it. "We’re looking at it. The Financial Stability Board is advocating it and G-20 is also in favour of it," he said, adding issuance of the Aadhar numbers provided a lot of hope in this regard.

Talking about the rationale behind creation of credit information agencies, he said this would help in increasing lending activity to small and medium enterprises and poorer sections of society. — PTI