Hung Parliament verdict may affect rating:S&P

Standard & Poor's today said lack of clear mandate in the Lok Sabha elections (scheduled in 2009) may lead to protracted period of uncertainty and stall economic reforms.

Such a state of affairs (hung Parliament) could affect ratings on the sovereign (India), S&P said in report titled "Politics And Policy Environment: Credit Constraint For Many, Support For A Select Few In Asia-Pacific".

India’s rating now is "BBB-/stable/A3".

The current government's reform agenda is hindered by its minority position in the Parliament and by Prime Minister Dr. Manmohan Singh's lack of a political base and dependency on support from allies.

India's political landscape remains characterised by an entrenched bureaucracy, coalition politics, and a fragmented administration. Nevertheless, for a highly diverse country, India's political system is stable with significant power-sharing between the central and state governments, the report said.

The implementation of reforms in an effective and timely manner remains a key challenge. The vested interest of unions, public sector managers, and political parties has significant bearing on the working of the government.

The resistance to government's plans for privatisation and special economic zones underscore such challenges, S&P said.