'India economic reforms fate look bleak'

Nov 21 2012, 13:58 IST
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'India economic reforms fate look bleak'. (Reuters) 'India economic reforms fate look bleak'. (Reuters)
SummaryUPA govt is facing what looks like an insurmountable problem in Parliament.

The Indian government, reduced to a minority for the first time since coming to power in 2004, is scrambling for support ahead of a parliament session that will severely test its economic reform agenda, and its chances of success look bleak.

For the moment, there is no threat of the government falling. But an obstructive opposition and unreliable allies could mean there is little progress on reforms like opening up insurance and pension businesses when parliament's month-long winter session gets under way on Thursday.

Prime Minister Manmohan Singh has engaged in unusual dinner diplomacy with allies at his New Delhi home to build consensus on the next round of economic reforms, which need parliamentary approval.

Criticised in the past for cold-shouldering allies and opponents, Singh also plans to dine this week with leaders of the main opposition Bharatiya Janata Party (BJP), whose obstructionist tactics washed out the last session. But analysts doubt he will manage to forge a consensus on the reforms."If things go awry, and legislation gets deadlocked it would be negative for markets and will mean those that were pessimistic on Indian reforms taking shape will be vindicated," said Suresh Kumar Ramanathan, head of regional rates and forex strategy at CIMB in Kuala Lumpur.Analysts warn of a "nightmare scenario" in which the government loses a test vote in parliament on its flagship reform - opening up the retail sector to foreign supermarkets, a decision that has drawn fire from both opponents and allies who say it will destroy the livelihoods of mom and pop store owners.

The reform does no require parliamentary approval. But left- and-right-wing opposition parties, with an eye to upcoming state and national elections, want to use the session to hold the government to account on the policy, which they say does not have popular support.

They are pushing hard for a symbolic vote against the measure. If the government lost the vote, it would be an embarrassing setback for a policy on which it has staked so much political capital. It could also sap its political will to pursue more difficult reforms to cut high spending and reduce a ballooning budget deficit.Most of the initiatives Singh has announced to date have required only an executive order, so this session of parliament poses the biggest test yet of his reform drive.

If he fails to get key allies and the BJP on board, his reformist legislative agenda could stall. Among

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