New Delhi: The return of the UPA to power may have raised hopes of reforms, but the new government could face a tough job pushing them because of political and global constraints, global rating agency Moody’s said today.
Constraints are political and global: political factors may come in the way of scrapping fuel subsidies and reforming outdated labour laws, while the global recession still continues, according to the rating agency.
“The government is likely to have a tough job pushing through some much-needed reforms,” Moody’s said.
It said that returning to the path of fiscal consolidation will be challenging for the government if the global recession becomes protracted.
“The financial crisis will mean any steps to liberalise capital flows and foreign investment will be cautious,” it said.
The stock market, it said, is likely to rally after the election news, which surely did with the BSE and National Stock Exchange today touching their upper circuits, following which trading was halted for the day.
The markets had previously worried that gains by Leftist and smaller regional parties would weigh on the reform agenda and lead to a further blow-out in the already large fiscal deficit, Moody’s said.