India's stocks plunge as Gandhi plans government

NEW DELHI - Sonia Gandhi worked swiftly Friday to build a coalition government, but the euphoria of her election victory faded as stock markets plummeted on fears that her leftist allies plan to wind back fundamental economic reforms.

The uncertainty has been compounded by Gandhi's refusal to state whether she will grab the prime ministership and become India's first foreign-born leader as early as today.

Congress, the party that led India to freedom from British colonial rule and then ran the country for 40 years, is returning to power after eight years.

It is riding a surge of discontent among poor voters who disagreed with the Hindu fundamentalist views of outgoing Prime Minister Atal Bihari Vajpayee and felt his economic policies had worsened their lives.

The leftists appealed to pensioners with dwindling savings and people who lost their jobs to increased competition or privatization of state companies. They won 63 seats in Parliament - their best showing. Gandhi's hopes of forging a workable government hinge on their support.

Harkishan Singh Surjeet of the Communist Party of India-Marxist - a key Congress ally - sent jitters through investment circles when he declared that the sale of profitmaking state-owned companies must stop.

A.B. Bardhan, general secretary of the Communist Party of India, another leftist ally, said the government's privatization ministry "can go to the devil."

The statements caused investors to pull their money out of state oil companies and banks, and even India's premier high-tech firms.

The Bombay Stock Exchange, the Sensex, tumbled 6.11 percent on Friday to 5069.46 points - the worst one-day plunge in four years. The National Stock Exchange dove 7.92 percent to 1,581.40 points - its biggest single-day decline since it began operations a decade ago.

As concerns over economic policy raged, the key issue of who will head the new government remained unresolved.

Gandhi, 57, is originally Italian, but has held Indian citizenship for 15 years.

As they rallied support from allied smaller parties to form a government, Congress leaders were hesitant to state that she will take the top job, once also held by her mother-in-law, Indira Gandhi, who was assassinated.

Congress general secretary Oscar Fernandes said the party, as the largest member of the planned coalition, would choose the next premier. Their elected Parliament members will meet today, and an announcement could be made then.

But Sharad Pawar, a key ally who visited Gandhi Friday, said the coalition partners will decide "in a day or two" who will be prime minister. Pawar had opposed Gandhi as prime minister when she had a chance to form a government in 1999 because he objected to her foreign birth.

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