From the BBC:

Government fears hit India shares Indian shares have recorded their biggest-ever fall in a single day’s trading amid fears the new government could stall economic reform. The Bombay Stock Exchange plummeted more than 700 points, a 15% drop, before recovering slightly. Traders have fears about the economic plans of the new government, set to be led by Sonia Gandhi after her Congress party’s surprise election win.

…The BJP is against the Italian-born Mrs Gandhi becoming prime minister because of her foreign origins. [“Government fears hit India shares”]

The BJP lost because it was unable to properly communicate the importance of market-reforms–which cannot instantly repair the decades of damage done by India’s former socialist policies. Rather then focusing on the Italian-born Gandhi’s “foreign origins” they should have focused on the origins of her suggested left-wing domestic policies. On the plus side, as a Roman-Catholic, she may symbolically help bring peace between India’s warring religious-tribal groups as she is neither Muslim or Hindu–if she advocates the principle of individual rights as a solutuion, as opposed to the balkanization of promoting “group rights.”

The Bombay Stock Exchange (BSE) 30-share sensitive index fell 553.29 points in the first few minutes of trading, falling below the psychologically important 5,000-point mark and wiping billions of dollars off the value of India’s listed companies. Trading was temporarily suspended but the index slid a further 200 points after it resumed, forcing a second suspension. The BSE sensitive index closed the day at 4,505.87 points, down 11%. Analysts say the market crashed after foreign institutional investors, who had invested some $10bn in the Indian stock markets over the past year, began to sell heavily…Investors fear the Communists, who hold the key to the new government, would block economic reforms especially privatization of state-owned companies.

…The BJP and its allies had been widely expected to win on the strength of a buoyant economy and peace moves with Pakistan.

Hopefully, the Gandhi government will understand that whatever reforms they make they should not attempt to derail the Indian economic engine my throwing a socialist wrench into its motor. If Gandhi continues the previous “free-market”-like economic reforms expect the Indian stock market to rise over time.

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