* Congress seeks stable coalition
* Focus on domestic investment and demand
* Free to pursue foreign policy objectives
By Krittivas Mukherjee
NEW DELHI, May 17 India's Congress party held
talks on Sunday to identify allies for a stable new coalition
government after a sweeping election victory at a time of
sagging economic growth and regional instability.
Prime Minister Manmohan Singh's coalition defied predictions
of a tight election and was only about 11 seats short of an
outright majority from the 543 seats at stake, according to
election commission data. (For more stories click
In a country where unwieldy coalitions were becoming the
order of the day and hobbling policy, the electoral verdict this
time means Congress will call the shots in coalition building
rather than being dependent on the goodwill of regional parties.
The Congress' top leaders, including Singh, party chief
Sonia Gandhi and Foreign Minister Pranab Mukherjee, met on
Sunday and discussed potential allies.
They were expected to talk later on Sunday with the regional
Samajwadi Party, which is based in the northern state of Uttar
Pradesh, for a possible alliance, local TV channels said. The
party had backed the Congress-led government over the last year.
"I can only tell you that there are a lot many smaller
groups, many political parties or independents who are more than
willing to support this government in national interest,"
Congress spokesman Rajiv Shukla said.
Pollsters had predicted controversial regional chieftains
like Mayawati, a lower caste leader in northern India, could
have held the balance of power after the election, stymieing
economic policy and demanding ministerial portfolios.
A strong Congress-led coalition, free of pressures from its
former communist partners, has boosted the prospect of reforms
to encourage growth in Asia's third largest economy.
The new government will also have a strong mandate to deal
with security issues in a region overshadowed by instability in
Pakistan and Afghanistan.
Singh's coalition will be free to pursue closer ties with
the United States, which the communists had opposed. They
eventually walked out of the alliance over a civilian nuclear
Indian markets were set to surge on Monday on expectations
the clear election victory would lead to a strong and stable
government that would accelerate the pace of economic reform.
The rupee INR=IN was expected to strengthen past 49 per
dollar and bond yields were set to fall as the outcome should
encourage foreign investors, analysts said.
"The markets could go up anywhere between 1,100-1,300 points
over the next two to three days because you cannot have asked
for a better combination," Arun Kejriwal, strategist at KRIS,
said of the share market
The Congress must form a government by June 2.
While a strong mandate gives the reformist Singh the freedom
to pursue market-friendly reforms, Congress party leaders struck
a cautious note saying they would rather focus on reviving
"Some of the icons of the financial world who were
advocating financial reforms have closed shop. We have to be
cautious this time," Trade Minister Kamal Nath said in a
During the election, the Congress had campaigned on a record
of spending on the rural poor, including a public jobs programme
in the countryside and a costly loan waiver programme for
indebted farmers, and was unlikely to give up such a platform.
"Inclusive growth was the mantra of success," wrote
political analyst Mahesh Rangarajan in The Mail Today.
The Congress leadership was also expected to discuss a
cabinet role for Rahul Gandhi, heir apparent of the Gandhi-Nehru
dynasty. He is seen as the architect of the Congress party's
resurgence, particularly in the northern states.
Though Singh, 76, will retain his office for now, Gandhi is
projected as a potential future prime minister.
"Verdict 2009 has also been a decisive judgement on the
39-year-old Rahul Gandhi as a campaigner, political tactician
and as the ordained one who would be king," wrote the Times of
India. "And the judgement is overwhelmingly in his favour."
(Writing by Sanjeev Miglani; Editing by Alistair Scrutton)