The Left support to the United Progressive Alliance (UPA) government did not come cheap in the past four years, and many in India Inc feel the government would press ahead with key liberalisation initiatives that the ally was vetoing.
The government had proposed a new round of liberalisation initiatives including reforms in banking, pensions, the retail sector and easier labour laws among others. Most of these, however, had hit a roadblock after the Left parties voiced stringent opposition.
Some industry captains and analysts said with elections round the year, not many of these initiatives would get a heads up, while many felt otherwise.
“We are concerned about the declining business confidence in the economy and extremely worried about any developing governance vacuum emerging out of this political crisis,” President of Federation of India Chambers of Commerce and Industry (Ficci) Rajeev Chandrashekhar said.
Among other proposals, the Left parties have been strongly opposing opening the floodgates for foreign direct investment (FDI) in retail, fearing it would hurt the interests of neighbourhood kirana stores.
A government-commissioned study carried out by Indian Council for Research in International Economic Relations however, found that big corporations’ retail foray would not drive away small stores out of business.
Organised retailers are hoping the Left’s withdrawal of support would open up the sector further. “We believe the government has chance to open up some sectors," said Kishore Biyani, Managing Director of Future Group that runs the Big Bazaar chain of stores.
JSW Steel Vice Chairman and President of Assocham Sajjan Jindal said the withdrawal of support from the Left was anticipated.
“We support the nuclear deal in the interest of country and whosoever supports the government on this issue, deserves to be praised,” Jindal said.
Economists also felt that the fresh political developments were unlikely to have any bearing on the broader economy.
“The momentum in the economy has more to do with external factors such as oil prices and less with domestic political developments,” said Delhi-based economist TK Bhaumik.
He said the government would most likely maintain a “status quo” on the economic policy front.
“With elections not many months away, the government would adopt a pragmatic approach and maintain the current stand on many politically contentious matters,” he said.
(With inputs from Indulal PM in Mumbai)