Indian general election results will be announced May 16 and are likely to have far-reaching implications for the course of the Indian economy. Why pay attention to the elections in India, the largest vote mounted in human history? After all, India’s not even in the same hemisphere as the United States, as one observer said on TV.
But while average folks and mainstream news can afford to be hilariously uninformed about the Indian election, compliance professionals of companies doing business in or with India cannot be so unmindful.
Anyone charged with monitoring compliance of a business that touches on India should pay close attention to these results. Whether the nation retains the scandal-ridden Congress Party or ejects them in favor of the slightly less scandal-ridden Bhartiya Janata Party (“BJP”), the election result is likely to bring significant changes to the Indian enforcement and business environment. Be prepared for both economic growth and increased enforcement risks in a market where risks abound.
The Congress party has been in power for a decade that has seen India’s once promising economic growth crushed not only by global economic forces but by a ruling government that was alternatively corrupt, incompetent and somnolent. The BJP has a mixed history of economic reform at the national level, but likely Prime Ministerial nominee Narendra Modi has a good track record of growth in his home state of Gujarat. A triumphant BJP will need to post some early economic wins to get the country back on track and regain investor enthusiasm.
The change in elected government will also greatly affect the country’s notorious civil service, which holds much of the day-to-day power over the function of business life in India. Businesses are likely to face severe pressure as a new wave of politicians and reassigned bureaucrats in this notoriously corrupt market seek to recover the cost of their elections or reap the rewards of their new posts. The BJP will bring both genuinely held policy differences and its own share of rent seekers. Change will radiate from the central government through the states.
This transitional period will require greatly enhanced attention from anyone minding compliance in the market. It may be a free for all but it won’t be free.
Russell Stamets is a Contributing Editor of the FCPA Blog. He was the first non-Indian general counsel of a publicly traded Indian company and was general counsel for a satellite broadcasting joint venture of a large Indian business house. Russ can be contacted here.