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India's economic stimulus? Politics.

India's business community cheered this week's stunning election result.

Traders react inside a brokerage in the western Indian city of Ahmedabad May 18, 2009. The BSE Sensex surged 17.3 percent on Monday, triggering circuit breakers that shut the market early as investors welcomed the ruling coalition's unexpectedly decisive election victory. (Amit Dave/Reuters)

BANGALORE — It took a mere weekend for Rajan Malik’s mood to do a complete cartwheel.

The Mumbai-based CEO of Eatwel India, a company that owns a franchise of the American fast food chain Subway, has operated under tough economic conditions these past few months, keeping costs under check and growth plans on hold.

When India’s parliamentary election results started pouring in on Saturday, Malik could not contain his optimism. “We will have a stable government,” he said, “Prime Minister Manmohan Singh is an Oxford-trained economist and he is sure to do a good job."

On Monday, when the stock markets hit the upper trigger within seconds of opening and the benchmark index posted a record 17 percent gain, Malik made up his mind. He would add two more Subway stores to the three he already operates in Mumbai’s Andheri suburb.

Within the next 12 months, he plans to add another two to take the total to seven Subway stores. “Things will look up, people will start spending money,” predicted Malik, explaining his thought process.

In an economy driven as much by sentiment as by fundamentals, the decisive and astonishing return of the Congress Party-led UPA alliance in the election has served as a big mood-booster in India's business community. Singh, who will be prime minister for a second term, is credited with shepherding the start of India’s economic liberalization in 1991.

For several successive years until last year, India’s economy had grown at the world’s second-fastest rate of between 8 and 9 percent, primarily fuelled by a large domestic economy and the rising consumption of a growing Indian middle class.

The economy has since cooled, but India’s business leaders are taking great comfort in the fact that the government is not held hostage by a coalition of political parties as it was in the past, with each pulling in a different direction.

The communist parties that backed Singh in his last term, for instance, were vehemently opposed to disinvestment in state-owned firms, labor reforms and opening up sectors such as banking and insurance to foreign investors.

“Business can take solace that a stable government is reasonably assured for the next five years and India can pursue economic policies that pay off,” said Ajit Ranade, chief economist of the Mumbai-based industrial conglomerate, Aditya Birla Group.

http://www.globalpost.com/dispatch/india/090519/the-next-indian-boom