Political uncertainty and financial panic swept India today as the stock market was shut down after it worst-ever plunge and two powerful communist parties refused to join a new government alliance under Congress party leader Sonia Gandhi.
Italian born Gandhi, aged 57, will meet President APJ Abdul Kalam tomorrow to discuss formation of the government, senior Congress leader Manmohan Singh said.
She will take the oath of office on Wednesday, said AB Bardhan, general secretary of the Communist Party of India, one of several left-wing parties that have agreed to support a Gandhi-led coalition government in Parliament.
The market crash, which began when election results in the world’s biggest democracy were announced last week, has cost Indian investors more than €36m.
The communists refused to join Gandhi’s coalition but were expected to influence it from the sidelines.
They said they would back her ascension as prime minister in the coming days, but not from within the coalition.
As she prepared to seek formal approval from the president for the formation of what will now have to be a minority government, Hindu nationalists added to the turmoil with street protests against Gandhi’s bid to become the nation’s first foreign-born leader.
And investors feared Gandhi would have to backtrack on her pledge to go forward with India’s economic liberalisation, or that the communists, with 62 seats in the 545 member parliament, could block key reforms such as the privatisation of state-run companies.
That triggered the worst ever sell-off in the history of the Bombay Stock Exchange’s 129-year history.
Both the Congress party and the leftists were declaring their support for a business-friendly environment.
“We would like to appeal to all those who have any doubts that we are for stable economic growth,” said Jyoti Basu, senior leader of the Communist Party of India-Marxist.
Gandhi needs the communists to secure a majority in parliament.
Political analyst Pran Chopra said the future of the Gandhi-led government was uncertain.
“By staying out, the communists will be free to criticise anything the Congress does. This will constantly erode the confidence in the government,” he said.
“Their decision not to join, leaves the left parties free to raise objections against policies that they don’t agree with.”
At the same time, the communists – who are opposed to a hard-line Hindu nationalist presence in parliament – do not want to see the collapse of a secular government led by Congress and will likely tread carefully, others said.
Gandhi, born Sonia Maino in Italy, moved to India in 1968 to become the 21-year-old bride of Rajiv Gandhi, who later became prime minister and was assassinated in a suicide bombing in 1991.
Gandhi became an Indian citizen in 1983.
She will be the fourth member of the Nehru-Gandhi dynasty to lead India, after her mother-in-law, Indira Gandhi, and her husband. Indira’s father, Jawaharlal Nehru, was India’s first prime minister after independence from Britain in 1947.