Govt mulls more reforms

[suguhopes]

Armed with new ally, UPA puts more FDI in telecom, pvt nuclear power
on agenda.

The United Progressive Alliance (UPA) plans to take advantage of the
exit of the Left from its governing partnership to move swiftly on
next-generation reforms like 100 per cent foreign direct investment
(FDI) in telecom services.

Sources added the government may also choose to open up some specialty
retail sectors like sports goods and electronics to foreign
participation. This was part of its reform agenda that was kept in
abeyance last year in anticipation that the Left, whose 61 MPs voted
with the UPA in Parliament, would oppose the move.

Atomic energy generation, which is barred to even domestic private
companies, may also be opened to private investment.

These issues are over and above key pending legislations to reform the
banking, insurance and the pension system which have been stuck owing
to consistent Left opposition, chiefly to greater foreign
participation in these sectors.

GOVT PROPOSES, LEFT DISPOSES

(The pending reform agenda)

The Pension Fund Regulatory Development Authority Bill: Stuck because
the Left wants guaranteed returns to subscribers and no foreign
investment in pension funds
Insurance: The government promised to raise the foreign investment cap
to 49 per cent from 26 per cent and introduced a Bill nearly four
years ago.

Voting rights to foreign investors in banks: Bill pending to raise
voting rights of foreign investors, currently capped at 10 per cent
irrespective of their stake in private banks
FDI in speciality retail: Draft Cabinet note to allow FDI in
speciality retail sectors like electronics, sports goods and
stationery in limbo since last year

Sources close to the developments told Business Standard that the
government might make its first moves in this direction soon after it
settled down with its new political partner, the Samajwadi Party (SP).
The Left formally withdrew support to the government today and the SP,
with 39 seats in Parliament, extended it.

A trust vote is slated for July 21. Though the UPA is still a little
short of the required numbers for a comfortable majority, the stock
markets appear to have cheered the renewed prospects of political
stability with the new alignments in the government.

Today's developments have raised the sense of expectation in
government and industry circles that Prime Minister Manmohan Singh,
along with key ministers like Finance Minister P Chidambaram and
Commerce Minister Kamal Nath, will be able to finally deliver on their
earlier promises.

Rajya Sabha MP and Ficci President Rajeev Chandrasekhar feels that
with political crisis over, the inertia in governance over the past
two or three months will end. "Hopefully, the government will come
back to address pressing issues on the economic front, now that the
political crisis is past. And, if in the process it passes pending
legislation, it would be a good thing," he said.

The fact that less than a year is left for general elections is,
however, considered a constraint. "Frankly, it is election year and I
do not think that the government will have the time to focus on too
many reforms," said a leading industrialist.

The SP's economic demands over the past few days, as articulated by
General Secretary Amar Singh, have also led to fears that corporate
rivalries and interests may extend from the boardroom to government
decision-making.

N.Sukumar
Research Analyst