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India's economic stimulus? Politics.

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

Singh’s last term was shaky on several occasions. Regional parties and the communists that propped up his coalition virtually blackmailed the Singh government on key issues, by threatening to withdraw their support.

This time around, in several states, the voting pattern showed a correlation between victory and local governments’ performance.

Of course, challenges remain.

Singh may swear in a dream team of high-performers in his cabinet, but it would still be a tall task for the government to fix India’s shaky infrastructure, its huge budget deficit, its corrupt bureaucracy and the leakages in its social spending, all within its five-year term.

"It will be a challenge for the government to deliver on high expectations," economist Ranade warned.

Still, India is likely to be a big destination for foreign investors who come in shell-shocked from the recessionary economies of the West, said Bangalore-based Vijay Angadi, managing director of the New York-headquartered Novastar International Fund. The predominantly U.S. fund manages the wealth of several prominent New York families, including many billionaires.

Key economic indicators such as car sales and cement production have been veering to the positive in the last couple of months. The certainty of a stable government would further investors, Angadi says.

“A lot of money will come in from overseas now, our investors are guardedly optimistic about India,” Angadi said.

More on India's politics and economy:

Congress wins big

The Gandhis: A Guide

The Nano is burning rubber

 

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