The Indian government is expected to revive an economic reform agenda
following its victory in a confidence vote earlier this week. Anjana
Pasricha has a report from New Delhi.
When the
Congress-led coalition government came to power four years ago, it
promised to open the economy in sectors such as insurance, banking and
retail. But communist allies stalled those plans.
But since
left parties parted ways with the government, hopes have risen that the
country's economic reform agenda will get a new lease on life.
The
government, which survived a confidence vote earlier this week with the
help of new political partners, has already promised to carry forward
the reform process.
Economists say the government could revive plans to sell part of its equity in public sector companies to shore up its finances.
There
could also be some good news for foreign investors - foreign
investment in the insurance sector is likely to be raised from 26 percent at present to 49 percent.
However more controversial reforms are expected to remain on the backburner.
Economist
D.H. Pai Panindiker, who heads an independent research group in New
Delhi, the RPG Goenka Foundation, says the government is unlikely to
concede to a long-standing demand of industry to change India's archaic
labor laws.
"They will definitely stay away from labor reform,
which can create a lot of uncertainty or some kind of apprehension
among some sections of society," he said. "For example if you make
labor a contract, it may create some dissatisfaction in the working
class."
The government is also unlikely to open up the retail
sector to large foreign chains such as Walmart. So far only foreign
retailers selling single brands such as Nike are allowed in the
country. There is widespread opposition to large retail chains from
owners of millions of mom and pop stores, who fear that these chains
will threaten their livelihood.
Political analysts say the
government, which is already grappling with high inflation, is no mood
to do anything that might alienate voters when general elections are
less than a year away.
Nevertheless, Indian industry is
optimistic that the economy will get fresh momentum at a time when many
fear that the high growth witnessed in recent years might be tapering
off.
