Ahead: Growth- Despite the CMP

A month ago, the dance of democracy turned the stockmarkets upside down,
helped by loose talk from the left of center in the all-new Congress-led UPA
coalition.

That was the early warning. Now there''s the "common minimum
program" (CMP) of the coalition. A populist, fanciful document, from a PM
who was the original architect of economic reform in India? It''s a taste of
the reality, if you can call it that, of coalition politics.

The CMP wants to increase spending on education to health to rural loans,
debt relief, and even an Act that "guarantees" employment. (That''s a
bizarre throw-back to old-style socialism in a world that''s moved ahead.) The
CMP doesn''t say, though, where the additional revenues would come from.

And that could nearly double the fiscal deficit, already at over 10%. But it''s
also very unlikely that Manmohan Singh will drive the economy over the edge,
however populist the coalition he has to live with.

So where does that leave the tech industry? On the bourses, very shaken up,
along with other industries. But the Sensex is a poor reflector of industry
health. The recent good results by tech companies suggest that after the year of
revival, the recovery is firm and clear. Let''s look at the year ahead.

Services exports should be largely unaffected by most things the government
does-no one wants to derail its course. Every Indian state, left and right,
including West Bengal, is very keen to "bring in" this employer and
forex earner. Caution: the coalition could suddenly eye this sector as one
answer to that fiscal deficit, and tax the hell out of it...

The domestic market is led by the medium to large enterprise, a group well up
the recovery curve-and that includes strategic, high-value tech deployment in
the large enterprises and public sector units. With PSUs now by and large
suddenly out of the disinvestment scanner, tech spending there, too, will move
back on course, rather than the "wait, watch and do nothing" periods
in anticipation of new owners.

Without any immediate hostilities ahead, Defence, too, will continue
significant spending this year on telecom infrastructure and IT.

The shaky area is e-governance, both in the Center and in the states. The CMP
does not have tech very high up on its agenda. But then, earlier initiatives
will continue. They must do so, not just in IT (such as the "golden
quadrilateral" highway project that''s helped make, inter alia, Jaipur a
BPO desination).

Tech is firmly back on the recovery and growth path. As for the CMP, despite
the strong dose of populism, I believe that better sense, and Manmohan Singh and
P Chidambaram, will prevail. Never mind the Sensex.

Prasanto K Roy