In Mexico, they have the siesta. They go to sleep in the afternoons, and things stall. In India, we have elections.

Mexicans blame tradition and sleep. We cite democracy and sleep-walk to disaster.

Mexicans started liberalising their economy around the same time that we did. They ran their economy to the ground soon, and needed a huge $50 billion IMF bailout package. Their growth since then has been impressive. They are active partners in the most successful regional grouping of recent times, the NAFTA. They are taking over the spices market in Latin America. They have even qualified for the World Cup.

Since mid-1991, Indians did everything right. A steady currency, growing exports marked initial breakthroughs. Industry did go through a downswing, but apart from cyclical factors, this was because higher output awaited a long-pending alignment with international interest rates. Inflation was under control. But in end-1997, growth has stalled. Exports have nosedived. We are not just alone, without a place in a number of key regional groupings that have evolved in recent decades, but we are out of place. We still sport outdated institutions and corporate laws that date back to mid-20th century (in some cases, as with the Indian Telegraph Act, we date back to the previous century). Our infrastructure is creaking at breaking point. Already, experts say we have grown just about as much as we can with our present level of roads, power, transport. We have a vast rural mass that refuses to turn into a rural market: health, education and technology are still strangers to them.

There is only one reason why India has faltered on progress: its politics. Indecision, or a balance of power that does not allow any angular positions to be taken on the economy by any decision-maker has eroded all hopes of smooth policy continuity and predictability. Three changes of government since the last elections in mid-1996 (Mexico has had two presidents in six years) have added immeasurably to the risk incurred by every rupee invested. Risks being so great, the investment atmosphere was bracing for difficult times.

Now they have arrived. The election we face does not merely add to risk. It is doing clear, positive, and substantial damage to India's business base. The damage is not just in terms of its absolute cost, which, of course, will swell the fiscal deficit by that much more. The real damage will come in the following ways.

First, cheap money is available after a gap of nearly 18 months, but companies would not wish to invest now. They would rather wait six months to make sure that policies do not change. A huge effort by the Reserve Bank to align Indian and international interest rates, indeed one of the chief achievements of the reforms process, is all set to go waste.

Second, the union budget, usually an early indicator every calendar to investments, will not be announced. Investors will not know the exact financial situation of the government, a key investor partner of the corporate sector if mega-infrastructure projects are at all to come through. Nor will they get the obvious tax and policy directives that they peg business around.

Third, the disinvesment programme is obviously on hold. Public sector accountability will await a new government, till which time PSU bosses will simply bide time rather than face uncomfortable questions for any independent initiative displayed during this period from a new government.

Fourth, infrastructure policy-making is postponed for six months. Which will postpone financing by a year, and the projects, by a chain effect, by several years. Meanwhile, alternative investment opportunities may open up in other areas for international investors.

Fifth, crucial negotiations are currently taking place in multilateral and bilateral trade, in accordance with new World Trade Organisation parameters. In a dog-eat-dog world, India will not have a government -- the basic minimum -- to represent its interests as bureaucrats muddle through the process. The talks cannot be postponed, there are deadlines to meet.

Sixth, financial market developments, which include introduction of derivatives, the widening of the debt market, further access to international capital, will all await a new finance minister, and his readiness to go ahead with these changes. A shift in corporate finance patterns from straight bank credit to tradeable debt instruments may suddenly stub its toe.

Finally, the biggest danger: what if Indians decide one of these days that siestas are preferable to democracy?

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.