Of manifestos and manias

To say that the market is happy with the Congress victory would be an understatement. But would investors have been as happy had they brushed up on the Congress manifesto?

Parties rarely live up to their campaign promises, but it’s worth taking this manifesto at face value. The Congress has been touting its populist measures—the rural jobs scheme and the farm loan waiver—during the entire campaign.

This populism is abundant in the manifesto. The party promises 25kg of grain a month to families below the poverty line, a measure that will increase food subsidies, already at Rs30,000 crore annually. It also promises to expand last year’s Rs65,000 crore loan waiver to reach more farmers, while shirking off disinvestment for public sector enterprises in manufacturing. This can’t help the fiscal deficit.

The Congress has a genuine chance to pursue reform. But its populism is at odds with the reform agenda the market thinks imminent. The mania appears to have blinded investors to this tension.