The return of the United Progressive Alliance [ Images ] government to power will improve business sentiment and expedite recovery of the economy, reeling under the impact of the global financial meltdown, feel economists.
"(The) mandate is very clear. It is a matter of great relief and will be very good for the economy. Investor sentiment will improve as there is a clear mandate for five years," said Saumitra Chaudhuri, member of the Prime Minister's Economic Advisory Council, while commenting on the elections results of the 15th Lok Sabha.
Describing the poll outcome as 'very positive', Rajiv Kumar, director of ICRIER, a city-based economic think tank, opined, "Economic recovery will be earlier than expected."
The UPA, which is all set to form the new government, he added, "will not have to depend upon the Left (parties for support). Government will be able to carry forward the economic reforms programme and there will be continuity in the policies."
On the impact of inflow of foreign investment, Chaudhuri said, "FDI will improve with improvement in investment sentiments. Other factors too are important." The Indian economy, which grew by about 9 per cent for some years, is estimated to have slipped to 6.5 per cent during 2008-09, mainly on account of the global financial crisis. The growth rate for the current fiscal has been estimated at 6 per cent.
Calling the election results as "surprising", Abhijit Sen, renowned economist and member of the Planning Commission, said it will improve business confidence and give a push to the stock markets.
"This is a very good result. It is very surprising as even Congress would not have imagined it. It is well beyond the imagination of Congress," he added.
Sen further said, "As the Left parties are not there, one will have to judge very carefully what it means."
As an immediate priority, Sen added, the government will have to take steps to neutralise the impact of the world economic crisis, which is having a crippling effect on growth.
Pointing out that business sentiment will improve with removal of political uncertainty, Chaudhuri said, "Business confidence will go up. It will be good for the economy."
A clear mandate at the elections, Kumar felt, will help the UPA to provide a stable government which will be "good for the Indian economy. It will also be good for the whole region."
Most of the global economic think tanks and Reserve Bank of India [ Get Quote ] have projected moderation in economic growth during the current financial year.
The RBI projected a growth rate of 6 per cent for 2009-10, down from an estimated 6.5 to 6.7 per cent in previous fiscal.
While the World Bank expects the Indian economy to grow by 4 per cent, the International Monetary Fund (IMF) projected a growth rate of 5.25 per cent for India.