Even though several corporate India executives have recently joined the Aam Aadmi Party while others like Bicon's Kiran Mazumdar shaw have praised the party for its anti-corruption stand and, the party' s populist measures are worrying investors on Dalal Street.<br /><br />

Even though several corporate India executives have recently joined the Aam Aadmi Party while others like Bicon's Kiran Mazumdar shaw have praised the party for itsanti-corruption stand and, the party' s populist measures are worrying investors on Dalal Street.

At the heart of the investor community's hesitation to accept the AAP wholeheartedly is the party's promises of free water and cheap power.

The anti-establishment party which recently formed the government in New Delhi with support from the Congress Party, has promised several freebies such as free distribution of 700 litres of water per family and slashing of power tariffs is beginning to worry investors who believe that now both the Congress and the Bharatiya Janata Party, including other regional parties, will begin to root for more such populist scheme at the cost of reforms.

The Aam Aadmi Party (AAP) government in Delhi has decided to give free water to all households consuming up to 20,000 litres and slash electricity tariffs by half for those using less than 400 units a month. The Congress-ruled Haryana has followed suit by announcing a Rs 200 rebate on power bills, while Chhattisgarh under the BJP has commenced distribution of foodgrain at Re. 1/kg to about 50 lakh poor families.

Power distribution companies in Delhi are already crying fowl about the cheap power promise as they are facing accumulated losses of Rs 11,000 crore and it is not possible for them to reduce the rates as promised by the party. Little wonder that stocks ofReliance Infrastructure, which supplies power to Delhi, have dropped over 3% since January 1 while the Tata Power scrip has fallen 7.7%.

The party has also decided not to allow global majors into the multi-brand retail sector, thus shutting out a very lucrative market for the Wal-Marts and Tescos of the world. They fear, the AAP's insistence on populist Left-of-the-centre economic agenda is likely to be a death knell for the economy and business.

"AAP has started on a wrong note, and if its surge continues, it could be a disaster for the economy and stock markets," Deven Choksey, MD, KR Choksey Shares and Securities told The Economic Times.

Clearly AAP's populist measures is creating a domino in other states and are bound to harm the country's finances.

The biggest concern, however, isthe prospect of AAP eating into BJP votes in urban areas.

According to Andy Mukherkee, AAP's rise isa bad omen for this year's general election.

As he writes in a Reuters BreakingViews column, "The race to get to the halfway mark in the 545-member national parliament won't be an easy one for BJP leader Narendra Modi and his coalition partners. Even if the Common Man Party wins just 20 seats in the April elections, it could undermine Modi's chances of becoming prime minister. This makes investors wary. Modi is their preferred candidate to slay India's stagflation. An inconclusive election result could lead to greater paralysis in economic policy."