DMK withdraws support to UPA government: Economic Impact of Sri Lankan Tamils fiasco
Key regional ally Dravida Munnetra Kazhagam (DMK) pulled out of India's ruling coalition on Tuesday in protest against the government's position on a U.S.-backed United Nations resolution on war crimes carried out during Sri Lanka's civil war against Tamils ethnic minority. Here are some views of experts on the issue.
COMMENTARY
SANJAY MATHUR, HEAD OF ECONOMICS RESEARCH, ASIA PACIFIC EX-JAPAN, RBS, SINGAPORE
"There was a lot of critical legislation required to deliver the projects proposed in the budget, like the industrial corridors. This will slow it down. It has injected a fresh dose of uncertainty.
But I think the government cannot overstep on the fiscal correction. The budget dynamics is hard to alter because the threat of a rating downgrade is severe. It is unsettling for foreign investors.
Because of the current account gap, we are reliant on flows. If the flows get truncated, it would be difficult. But I think it would be a knee-jerk reaction."
MOSES HARDING, HEAD OF ASSET-LIABILITY MANAGEMENT, INDUSIND BANK, MUMBAI
"Emergence of political risk at this crucial stage of policy reforms and fiscal consolidation is definitely a worry. There will be risk from global rating agencies and shift into risk-off mode by global investors.
"Impact will be negative, but I dont see weakness beyond 7.95 percent on 10-year bonds and 54.60 to the dollar on rupee."
A PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI
"If the government comes under threat and early elections are called, then fiscal consolidation will come under risk as diesel prices will not be raised.
One of the achievements of this
