Govt pushes reforms to beat economic blues

Govt pushes reforms to beat economic blues

New Delhi: As India’s boom gives way to gloom, the government is banking on a brief winter session of parliament that started on Tuesday to kickstart its long-stalled agenda of economic reforms.

Prime Minister Manmohan Singh’s cabinet has dithered for months on sensitive reforms to bring more foreign capital into Asia’s third-largest economy but, with growth slowing, the rupee at record lows and inflation stubbornly high, it now seems resolved to act.

“As you all know, the global economy is facing serious difficulties and if we don’t manage our affairs well we can also go down," the septuagenarian Singh told reporters outside the parliament building on Tuesday.

“Our country’s sustained development and prosperity demand that many of those bills should be converted into acts of our parliament."

The opposition is united in seeking a motion on inflation that, if passed, could lead to a no-confidence vote. The motion is unlikely to be passed, but the uproar nevertheless led to parliament being adjourned for the day.

A respected economist who helped India open its economy 20 years ago, Singh’s second term as prime minister has been overshadowed by corruption scandals and policy paralysis.

Indian corporations, hit by waning business confidence due to deferred investment projects and the rising cost of credit, have rounded on New Delhi for failing to act on home-grown problems as the economy suffers from global shocks.

Infrastructure firms, which India hopes will spend $1 trillion in the five years to 2017, blame policy paralysis for smothering growth. Executives at the Reuters India Investment Summit this week said a failure to tackle domestic woes could see India wasting its economic potential.

More than 50 legislative bills are due to be looked at during just 21 days of parliament, an ambitious agenda for a body known for walkouts and disruptive jeering.

The government is under pressure to pass an anti-graft bill and hopes to make progress on a new mining law and one that allows more foreign investment in pensions.

Opening the doors to foreign retailers

One major long-delayed reform, to allow foreign supermarket chains to invest in India’s $450 billion retail sector, does not require parliament’s backing and is currently with the cabinet for approval.

It is politically sensitive, however, since 90% of India’s retailers are currently small mom-and-pop stores.

With an eye on a string of key state elections next year, the opposition says it will use the session to speak out against the reform. The government and companies such as Wal-Mart say the reform will tackle inflation by increasing price competition.

Last week the government said it is also looking at relaxing the rules on small investor access to equity markets, and it is considering allowing foreign direct investment in the country’s struggling domestic airlines.

Oil refiners and companies have scrambled to buy dollars recently, pushing the Indian rupee to an all-time low on Tuesday.

India emerged virtually unscathed from the 2008 financial crisis but government predictions of a 9 percent growth and lower inflation this year appear to have been over-ambitious. It now faces an almost flat factory output and weakening currency.

The main opposition party, the conservative Bharatiya Janata Party, will support a motion by the Communist Party of India to censure the government for rampant inflation. The annual wholesale price index (WPI) has been nearly double-digits in each of the past 11 months.

The opposition will also use the session to attack the government on issues of corruption, and is calling for the interior minister to step down because of his alleged role in a multi-billion-dollar telecom licence scam.

The pressure for a so-called “adjournment motion" on inflation is a threat to the government, but it would need the support of the Congress party’s coalition allies to pass.

“An adjournment motion if it is passed is quite a serious matter, almost tantamount to a vote of no confidence," political commentator Swapan Dasgupta said. “After that the government would be obliged to seek a confidence vote... the government doesn’t fall but it becomes very difficult."