New Delhi
25 July 2008
The Indian government is expected to revive an economic reform agendafollowing its victory in a confidence vote earlier this week. AnjanaPasricha has a report from New Delhi.
When theCongress-led coalition government came to power four years ago, itpromised to open the economy in sectors such as insurance, banking andretail. But communist allies stalled those plans.
But sinceleft parties parted ways with the government, hopes have risen that thecountry's economic reform agenda will get a new lease on life.
Thegovernment, which survived a confidence vote earlier this week with thehelp of new political partners, has already promised to carry forwardthe reform process.
Economists say the government could revive plans to sell part of its equity in public sector companies to shore up its finances.
Therecould also be some good news for foreign investors - foreigninvestment 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.
EconomistD.H. Pai Panindiker, who heads an independent research group in NewDelhi, the RPG Goenka Foundation, says the government is unlikely toconcede to a long-standing demand of industry to change India's archaiclabor laws.
"They will definitely stay away from labor reform,which can create a lot of uncertainty or some kind of apprehensionamong some sections of society," he said. "For example if you makelabor a contract, it may create some dissatisfaction in the workingclass."
The government is also unlikely to open up the retailsector to large foreign chains such as Walmart. So far only foreignretailers selling single brands such as Nike are allowed in thecountry. There is widespread opposition to large retail chains fromowners of millions of mom and pop stores, who fear that these chainswill threaten their livelihood.
Political analysts say thegovernment, which is already grappling with high inflation, is no moodto do anything that might alienate voters when general elections areless than a year away.
Nevertheless, Indian industry isoptimistic that the economy will get fresh momentum at a time when manyfear that the high growth witnessed in recent years might be taperingoff.