As I write this column on Saturday, 10th May, a long election campaign--easily the longest in the history of Indian elections--has come to an end. And as far as investors go, we seem to suddenly be in the middle of a somewhat premature post-election rally. Rumour has it that the rally was a reaction to some kind of an information leak. This leak could plausibly have been the results of some exit poll as there was a precise point in the middle of the trading day when stock prices just took off, converting a routinely good day to an exceptional one.
We'll have to wait till Friday to see whether this particular rally is justifiable, and certainly, there is a history of election-related stock market moves to either be over-reactions. The last two times, in 2004 and 2009, they were also utterly mistaken about the meaning of the results. The markets took the 2004 results very badly because it immediately became clear that the communists would be partners in the government. In 2009, the markets reacted very positively because it got a decisive mandate for Manmohan Singh instead of expected hung parliament. Both times, the markets were wrong. The 2004-09 period turned out to be great for the economy and the markets, while 2009-14 turned out to be an utter disaster.
Of course, that's just a curiosity--it means nothing as far as trying to figure out what will happen on Friday. The past is a very imperfect and frequently misleading guide about the future. For almost six months now, a huge industry has been at work trying to predict what will happen on May 16. We've had no end of opinion polls, exit polls, all kinds of subjective analysis as well as a lot of simple-minded wishful thinking (daydreaming, even) pretending to be analyses. One could easily wonder at the purpose of it all. Why is it so important to know beforehand what the election result will be? If the results of these opinion polls could be relied upon, then they could still be of some use. But as things stand, they do little except to create meaningless talking points for the endless array of talking heads on the news channels. For savers and investors, it makes little sense to make decisions on the basis of this prediction factory.
However, no matter how positive the equity markets are feeling, in one sense this election campaign has generated some alarming signals for business, industry and economic development in general. We have just witnessed a campaign one of whose stronger sub-texts has been that business and industry are evil and the interests of industry and those of the people' are inherently inimical. Day after day, week after week, I have marvelled at the disgusting spectacle of the masters of crony capitalism try to wash away their sins by trying to paint all activities that might lead to anyone making any money as being inherently against these people. In this aspect, this has been deeply damaging election campaign. The simple political formula that has come out of it is that if anyone talks of economic development, then the easiest counter to that is to paint that idea itself as a form of injustice.
The worst part of this is how easily and comfortably has this idea been accepted by almost the entire media. I'm not sure whether this resulted from a deep set acceptance of the idea itself, or from some current political preference. However, this shouldn't have anything to do with the fact that it was the BJP that was talking about development and the Congress and others counter-attacking using this tactic. Whether out of belief or as a tactic, the re-emergence of this anti-business and anti-industry rhetoric in the vocabulary of mainstream political parties--and its acceptance by the media as a reasonable point of view--is a most damaging aspect of this election campaign.