Will Congress Party Defeats Spur Economic Reform? Since the current Congress Party-led government took office in mid-2009, Indian companies and foreign investors have been waiting for policy makers to unveil a new wave of economic reforms. They are still waiting. In recent months, political leaders suggested that the government would get moving after elections in Uttar Pradesh, Punjab and three other states ended. That happened yesterday. The results were so painful for Congress that some analysts say they might provide the spur the party needs to enact reforms, while others argue Congress is now so weakened that it may be unable to act. Here's both sides of the argument: Vikas Bajaj examines the arguments for why its defeat could compel the Congress-led government to get more serious about the economy: The case for why the federal government will get moving can be summed up in two words: survival instinct. Yes, Congress has been dragging its feet on the economy for years because it thought that populist policies would win it more votes. But these recent elections should have proven to its leaders that its policies did not work and that slowing growth and high inflation did not enamor it to voters. It now has just two years to revive the economy and tame inflation before the 2014 national elections. And the only surefire way it can do so is to get to work on all the proposals that have been piling up at the Planning Commission and the Finance Ministry. "These results will not strengthen or deepen the policy drift," Rajeev Bhargava, the director of the Centre for the Study of Developing Societies, told my colleague Sruthi Gottipati earlier today. It might, oddly enough, arrest it. Remember, it was a weak Congress government that enacted the first significant economic reforms in 1991. And it only started to do so because the country's finances were in terrible shape. The same is true again now. Heather Timmons explains why this defeat won't spur Congress to action: Congress didn't spring in to action when Anna Hazare administered what amounted to a public spanking to the party this summer, barely awoke when billions of dollars of foreign investment fled the country and shrugged when economic growth fell below 7 percent and when the latest statistics on malnutrition in India horrified even the prime minister. But a poor result, in a regularly scheduled election, in a state the party hasn't controlled for decades is going to suddenly spur the party to action? The idea is so doubtful that even stock traders and analysts, sometimes known to be a willfully gullible bunch when optimistic financial news is floated, don't buy it. The market fell more than 1 percent on the election news. "We think the results will not provide the political space for the government or the confidence to carry through unpopular reforms," Goldman Sachs said in a note to investors. The best to be hoped for from Congress is "muddle-through policies," Goldman said. Even the media has lost faith in Congress, a party that it has often spared hard questions. News anchors practically shouted themselves hoarse yesterday trying to get Congress Party members to admit there might be need for some introspection in the party, or that Rahul Gandhi may not be the best man for the top job. Without the glue of the Gandhi family holding the Congress Party together, what would it stand for?, one anchor demanded at one point. Nope, no one had a good answer. Instead, Congress Party members issued platitudes. In fact, the law minister Salman Khurshid said publicly that Rahul "did an admirable job leading us from the front." Hardly the language of reform.