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Ruling party's victory in India paves way for economic reform

MUMBAI, India — India Inc. breathed a huge sigh of relief Sunday, a day after the ruling Congress Party won one of the most definitive electoral victories in nearly two decades of fractious coalition politics.

Congress' victory — and the near-collapse of India's once-powerful Communist parties — means key reforms in insurance, pension funds, banking and retail are now likely to get enacted.

But that doesn't translate into a mandate for sweeping pro-market liberalization, analysts say.

The global financial crisis has tempered India's appetite for deeper foreign investment and looser regulation. Moreover, Congress, which oversaw an unprecedented four-year boom, has cast itself as the party of "inclusive growth," a policy approach aimed at helping India's vast underclass while also pushing free-market reforms. It is unlikely to roll back costly social welfare programs that helped the party win the election — but also added to the nation's burgeoning fiscal deficit.

With the Congress-led coalition capturing 262 seats in India's 543-seat Parliament, Congress officials were in talks Sunday to finalize their political alliance — seeking the 10 additional spots needed to nudge them over the halfway mark in Parliament.

The party's strong showing put to rest pre-election fears of an unwieldy coalition.

Nandan Nilekani, co-chairman of Infosys, one of India's largest information technology companies, called the result "very positive for India's economic policy and reform."

"This is a very wise signal from the voters that they want a government which is stable," he said.

Jubilation reigned on the pages of India's major business papers Sunday, with predictions of a bright future of rising stock markets, surging foreign investment, rebounding growth and fast-tracked economic reform.

Industry groups and business leaders quickly trotted out lists of hoped-for policy changes, urging the government to make good on its electoral mandate through tax reform and greater investment in technology and infrastructure.

Ruling party's victory in India paves way for economic reform 05/17/09 [Last modified: Monday, November 7, 2011 4:50pm]

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