- The Washington Times - Monday, May 17, 2004

NEW DELHI — Angry investors chanted “Down with Sonia Gandhi” outside India’s stock exchange yesterday, blaming the country’s prime minister-in-waiting for a panic that led to the biggest one-day plunge in the market’s 129-year history.

With the financial community unsettled about the prospect of a communist-backed ruling coalition, Mrs. Gandhi’s government was in deep trouble even before taking office.

Mrs. Gandhi was to meet today with President A.P.J. Abdul Kalam to discuss formation of the government. She will be sworn in as the first foreign-born leader of this nation of 1 billion people later today, said her party officials and allies.

Since Thursday, when parliamentary election results showed Mrs. Gandhi’s Congress party would be able to govern only with support from pro-labor, antiprivatization communists, India’s capital markets have bled about $45 billion, brokers estimate.

The outflow culminated in what TV newscasters called “black Monday.”

Regulators closed the markets twice. Rules require suspension of trading when stock values change more than 10 percent in a day.

After intervention buying from state banks and financial institutions, the Bombay Stock Exchange — Asia’s oldest — recovered halfway from its 800-point intraday fall, the worst since it opened in 1875. It closed at a 12-year low. The National Stock Exchange, India’s largest, plunged 17.47 percent, the worst day in its 10-year history.

Indian investors — whose funds have helped push growth to 8 percent in the past year and provided the capital needed to build highways, dams, hospitals and schools — were furious as they watched their holdings shrivel.

They blame Mrs. Gandhi, who had pledged to go forward with India’s economic liberalization, for not making any reassuring statements to investors since her election victory.

The 57-year-old widow, who was criticized during the campaign for lack of experience in government and for coasting on her famous name, didn’t mention the economy in a nationally televised speech Saturday — a day after markets suffered their worst one-day plunge in four years.

Most of the fleeing funds belonged to foreign investors, who had put $7 billion into India’s markets during a yearlong rally.

“There’s a possibility this government might not last for more than a year,” said Rahul Sen, an economist with the Singapore-based Association of Southeast Asian Nations Economic Bulletin.

In the meantime, he said, “the reforms process is going to slow down. Probably the [privatization] process is going to be stopped.”

Mrs. Gandhi’s communist allies insist no profitable Indian government entities should be sold, while manpower and money should be spent to improve unprofitable ones.

The communists, with 62 seats in the 545-member legislature, said yesterday they would not join Mrs. Gandhi’s government, but rather provide it only legislative support to give Mrs. Gandhi the numbers needed for a parliamentary majority.

“The left is supporting from outside, but this confusion is because they can still wield pressure on the Congress constantly,” said D.R. Dhariwal, one of the chanting investors outside the Bombay stock exchange. “Each party head is making conflicting statements. That’s the problem.”

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