The most likely outcome of the next election is that NDA/BJP will sneak in with a moderate majority. The Congress has wasted too many months to be able to retrieve the situation now. It will lose not because of the Deal, though that will be said, but because the quarrel with the Left has cost it valuable policy initiatives. Inflation may not come down as much as the UPA hopes for because oil price does not look like being controllable without some drastic action by the regulators in the USA. This is not on the cards in an election year. Food prices may come down a bit, but the RBI has been too lax to bring inflation down by much.

But even if I am wrong the UPA without the Left or NDA will be absolutely the answer to India’s economic needs. (Of course, I would prefer a Grand Coalition of the Congress and BJP but let that be.) The point is that the unfinished agenda of reform can now be pursued. We can have FDI in retail; this alone will ease the food price situation by reducing waste of food grains, which currently runs at 15 to 20 per cent. We can have reform of the labour laws. Then rural labourers can move to manufacturing establishments which can take advantage of economies of scale and size. Millions of jobs can be created in low-tech manufacturing for exports. Rural under-employment has been blighting the country and this has been a consequence of the Left’s policy of job protection which made the starting of large factories impossibly costly because of the restrictions on hiring and firing.

... contd.