India's communists have embraced business and market fears they would pull the country's new government sharply to the left are overblown, business leaders in communist-run West Bengal state said.
Indian markets have dived on fears the government, elected last month with communist party backing, might slow economic liberalisation but the business leaders said the party had wooed foreign investors to West Bengal and had adopted pro-business policies over the past four years.
"There seems to be some perception problem," said C.K. Dhanuka, chairman of the eastern regional council of the Federation of Indian Chambers of Commerce and Industry (FICCI).
"One reason for this could be that almost all the comments that we have heard recently, and which appear to be troubling markets, have been made by talkers and ideologues".
The Bombay exchange's top-30 share index fell 16 percent in May and is Asia's second-worst performer in 2004, as fears of communist influence quickly reversed gains made when it became clear the Congress Party would be able to form a stable government.
The markets have only recovered a little of the lost ground in the past few days, but business leaders in Kolkata point to money pouring into West Bengal from western companies, despite nearly three decades of communist party rule there.
State capital Kolkata is emerging as an information technology centre, with IBM, Cognizant Technologies Solutions Corp and Computer Associates working alongside domestic giants like Tata Consultancy Services and Wipro Ltd.
Swanky shopping malls, usually seen as the preserve of the elite in a poor country, are springing up and changing the skyline of Kolkata, a city once controversially described by former Prime Minister Rajiv Gandhi as dying.
PepsiCo Inc, widely seen in the developing world as a symbol of global capital, will start making chips and snacks through its Frito-Lay unit in the state by the end of October.
"There is usually a difference between what these talkers say and what the people who run the government actually do when faced with ground realities," said Dhanuka, who runs polymers maker South Asia Petrochem.
Foreign investors dumped a record $800 million worth of Indian assets in May, their first month of net sales in 19 months. Concern has focused on whether the new national government would slow pro-market economic reforms.
"The communists certainly have the power to play a spoiling role as they have a large presence in parliament and their statements can hit sentiment, as we have seen," said Raamdeo Agrawal, managing director at brokerage Motilal Oswal Securities. But he added it was unclear how much influence they would have in the longer term.
"On balance I am optimistic that we will move forward on the broad economic agenda, with a few hiccups here and there," he said.
Investors have been particularly worried by repeated communist assertions that the deeply indebted Indian government would halt the sale of profitable state firms and expand social spending, worsening its chronic budget deficit.
But Harsha Vardhan Neotia, the managing director at Ambuja Cement Eastern India, said markets often over-reacted.
"Market volatility does not mean much from a broader perspective," he said. "The fact that the index is down does not mean the economy has suddenly gone into the doldrums".
FICCI's Dhanuka said the state government, the world's longest-serving elected communist government, had changed its attitude significantly in the past four years.
"In their first two decades in power, they concentrated on agriculture and land reforms. Now that they are comfortable that this sector is developed, they are targeting business and industry," he said.
A communist state government has not deterred Industrial Development Bank of India, the country's largest term lender, which last week held its first board meeting in Kolkata since 1995 as part of a push for business in the region.
Neotia said Ambuja Cement Eastern India has businesses worth more than six billion rupees ($132 million) in West Bengal, including housing projects, a cement unit, and hotels. In the pipeline are projects worth two to three billion rupees, including a shopping mall.