Jayalalitha's withdrawal of support underlines the fragility of coalition governments in India. Unholy marriages based on the ambitious, single-minded all- consuming desire for power and not on an alliance of common interests and goals cannot work. There will always be threats, and after a time, it will be impossible to accept and submit. Even the mouse will turn after a time. No government can effectively govern with the threat of a Damoclean Sword hanging overhead threatening to fall at any time. Even if the Congress can now cobble together a majority, the question is-how long will they be able to last?

If the country is to be rid of such threats to its stability, fresh elections must be called. No party should, however, be permitted to form a government unless it has a clear and unquestioned majority.

If that does nothappen and there is a hung parliament, President's rule should be imposed at the Centre. The President should rule with secretaries appointed by him. Additionally, my recommendation is that during this time a law should be passed limiting the number of political parties to a maximum of five. Such a move would stop this incessant creation of breakaway groups.

Democracy as a concept is wonderful but we appear to have taken it to a length that has made it ridiculous and unworkable. Political stability is an imperative. Without that there will be no focus on the country's development. Nor will foreign corporations or individuals be prepared to commit large sums, and without stability, it will take longer to pull out of the recession we are in. The recession is now over three-years-old. There is no sign of its end in sight. Although demand for goods and products exists, buyers lack the means to meet their commitments. Liquidity is still very tight. Most industrialists do not wish to sell as it is difficult toget payment. They prefer to either cut down production or just stockpile.

Regarding foreign exchange, the rupee has weakened on account of the political imbroglio. This coupled with weak exports will result in the further depreciation of the rupee.

Export growth has been pathetic. This becomes more pronounced when one looks back. In 1950, India's share of world trade was a whopping 2 per cent. This declined to 0.6 per cent by 1970, and it remains at roughly this level today. If we had maintained the 1950 level, our exports would have been at the same level as that of the other Asian tigers (China, Taiwan, et al). Our present exports of $35 billion is only a quarter that of China. If we look closely at our growth spurts in the 70s, 80s and more recently post- liberalisation, it would be noted that each of these had been preceded or accompanied by a devaluation of the rupee. This submits that our exports can only compete on price not on quality. Our export structure is practically frozen, with clothes,leather, diamonds, and handicrafts accounting for the bulk. There has to be a sea change. And exports must become quality-driven and not price-driven. To become competitive, we must become productivity conscious. Our competitors are cheaper than we are because the cost per unit is lower. And that is not solely because their financing costs are lower. Their employees put in a full day's work and produce more, while ours do not. Tisco, with 58,000 employees, produces 3 million tonnes of steel.

Pohang Steel of Korea produces over 21 million tonnes of steel with less than 30,000 employees.

The recently announced Exim policy is not calculated to boost exports. Rather the converse. It is more an import policy with an expanded list of 894 more items under the open general license (OGL). A further 414 items can be imported under special import licenses.

This is at a time when Indian manufacturers are competing with heaper foreign imports. Import growth last year was about 7 per cent higher than export growth.The new policy will, therefore, clearly put the rupee under further pressure. Up to now, the rupee has been stable and this is in part due to the inflow on account of the Resurgent India Bonds that brought in several billions of dollars and investment funds from foreign institutional investors. The latter is mercenary money and, with the present instability, will move out. With regard to bonds with reserves at $31 billion, we did not really need it. Interests on these are at a high rate. On account of all these factors, though some of my fellow bankers may disagree, I see the rupee depreciating to between Rs 47 and Rs 48 per dollar in the near term, that is, within the next six months.

Is this the time to invest? Absolutely. "Buy", the worthy said, "when there is blood on the streets." And there is. As the political/economic situation becomes more mired, prices will plunge giving opportunities. The stocks to buy would be infotech, pharma, FMCG, and those of triple-A companies. On these, it will bedifficult to go wrong. In these uncertain times, it is difficult for the credit policy to be very effective. Interest costs are low. Even with CRR cuts, etc, if costs are made even lower, industrial activity cannot take off without increased governmental spending on core activities. This will not happen in the magnitude that it should. I must say though that the spending that is taking place in Maharashtra on highways and flyovers is a step in the right direction. The wait is here. As things stand, the wait is likely to be long.