Surely, a majority government has its own strengths. Uninterrupted governance will aid vigorous policy formulation and implementation. In contrast, political instability robs investors of needed confidence and hence, the wish to avoid it. But one needs to look deeper than this logic, as to what happens to contents of policy under different scenarios, between one where the BJP has a majority and one where it has to adjust to coalitions.

The investor at this moment is failing to go beyond the fright of scrip prices crashing by the hour. But with the weekover, take a look. Even a majority government cannot blindly push through legislation of its own choice, even the much needed hard dose of reforms.

That is because the BJP is still in the process of replacing the Congress (I). So even it gains a majority, it would be unrealistic to expect fast paced and hard reforms. Reforms will come in calibrated doses, whosoever is in power.

Moderation is the buzz word, majority or coalition, and even the World Bank has acknowledged this. In its World Development report, the Bank has called to attention the need for a comprehensive and pragmatic approach to development, more important than ever before. A coalition government does ensure comprehensiveness. Have we not seen this in the government's policy formulation to insurance?

But what about pragmatism? Here too, while more room for global insurance companies would have ensured better service to consumers, the government did bow down to the labour lobby and restricted the equity participation limit to foreignplayers.

This is democracy in action, taking care of all sections and interests of society. Even a party in majority will find it difficult to rough ride over such concerns, be that in insurance or labour exit policies. Reforms could be slow-paced, but there is no escape.

But investors should take heart that while the government compromises on hard reforms in such cases, no compromise would work when it comes to framing macro-economic policies. And that is where the fund manager's interest lies.

Take fiscal deficit, for example. The government can get away with window-dressing like pseudo sale of oil equities for some time. Not all the time. Even a majority government will edge towards the brink of disaster, akin to what we saw in 1991-92, if it cannot bring itself to tackle basic issues. And with such eventualities lurking round the corner all the time, no one, neither a coalition partner nor the opposition cannot stop whatever reforms which are inevitable to keep the economy running. This has beenwell-experienced in the last three years, where almost all the parties have come to endorse the reform accent programme. And an enterprising finance minister can definitely tackle this. Consensus from opposition is unlikely as that goes against the political process. But certainly, agreement within coalition partners should not be difficult.

But what the new government needs to do, however, is to institutionalise the process of structural reforms, via the Planning Commission, the Finance Commission and the like. In fact, the government has been moving in these direction as witnessed by the establishment of regulatory authority for the power industry.

I think the markets have taken a needlessly grim view. Majority government or coalition, the issues that need to be tackled will not starve for want of due attention. The election appears to be giving more numbers to the BJP coalition than that in the last Lok Sabha. And that should be good enough to push in the needed reforms.

As long as the new governmentmanages the parliament well and pushes through legislative business with vigour, investors need not worry too much. If you have any doubt, look over what happened in the last six months. A reasonable budget was passed through and other things were left to the ground forces of the economy. And we seem to be doing pretty well.

Even the World Bank has pointed out that it is important that the development efforts must address human needs directly. The trickle-down theory is fine, but more direct focus is the pressing need of the hour and would also be politically very right. What matters is how the engine of economic growth is fuelled. And much of the action here is happening right now on the field of agriculture as well as on global trade. Much can be got out of the Indian economy if one attends to improving the incremental capital-output ratio, total factor productivity and capacity utilisation.

Right now, the Indian industry has excess capacity in fields of textiles, pharmaceuticals, steel and a fewothers. These can well be exploited as the demand picks up on the back of farm income growth.

The ICOR has been stagnating at around 4, whereas in 1970s it was as high as 5.76. Appropriate fiscal, monetary and taxation policies can promote higher utilisation of existing capabilites, both human and machine. The ICOR will move up, pushing GDP growth.

And such a process will fuel further growth of GDP. In the final analysis, this week's turmoil has more to do with the speculative build-up of over Rs 2500 crore of position, than any serious threat to the future health of the Indian stock market.