Here is why foreign brokerages' Modi bet is hollow

Foreign brokerages are betting on Narendra Modi becoming India’s prime minister in the next general elections in 2014.

Chris Wood of CLSA was the first to endorse Modi, when he said the BJP’s prime ministerial candidate is the only hope for the stock markets.

“The Indian stock market’s greatest hope in this respect is the emergence of Gujarat chief minister Narendra Modi as the BJP’s prime ministerial candidate. While the odds are definitely stacked against him, our view is the worse the sense of crisis the better Modi’s chance of winning,” he had told The Economic Times in an interview.

Following this, scores of foreign brokerages released research reports with similar views. The latest was Goldman Sachs.

[caption id=“attachment_1228133” align=“alignright” width=“380”]  Gujarat Chief Minister Narendra Modi. PTI[/caption]

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“Equity investors tend to view the BJP as business-friendly, and the BJP’s prime ministerial candidate Narendra Modi as an agent of change,” the report said, resulting in angry reactions from Congress leader and Commerce Minister Anand Sharma.

“Goldman is parading its ignorance about the basic facts of Indian economy; and it also exposes its eagerness to mess around with India’s domestic politics,” he told The Economic Times in an interview.

He also said the bank should do its business and not mess around with Indian politics.

The minister’s remarks expose the desperation of the Congress, for one he has no right to say that an investor - even if it is Goldman Sachs which has a good amount of ill-fame to its credit - should not speak about political situation in a country. If it is parking crores of funds in a country, it would want to take a view about the political risk there.

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But, at the same time, a reality check on foreign brokerages’ Modi bets is also warranted.

Will he be able to put economy on top of everything else and push through a clean agenda for the country? After all, as the head of a coalition led by the BJP, he will also dealing with the similar pressures that the Congress faced.

Until now, there has been no instance in the history when the BJP acted like a responsible and constructive Opposition in Parliament. Had it been, it could have spotted the coal scam. It is to be remembered that coal block allocations have been happening for long and the NDA was in power from 1999 to 2004.

That is why Jim Rogers’ comment on Goldman Sachs, the BJP and Congress is significant.

“Everybody who has had anything to do with running India in the past so many years have failed India,” he has told the Mint in an interview. Running a country is not only the ruling party’s responsibility. The onus falls on the opposition too.

“Has the BJP said or done anything revolutionary, or said anything different? They say we like business people better than Congress, but can they do anything other than making some cosmetic changes?” he asks.

Add to this the divisive nature of the BJP’s politics. Modi’s ascension has only accentuated its polarising image. There are many who fear under his prime ministership India’s social fabric will get damaged further. This too is a political risk.

In other words, both the Congress and the BJP carry the same amount of political risk. Foreign brokerages that endorse Modi now are just overlooking this fact.