'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 reform bills due to be introduced are measures to allow up to 49 percent foreign investment in local insurance companies and domestic pension funds. Currently, the cap for insurers is at 26 percent and foreign investors are barred from buying into pensions.

UNCERTAINTY

Uncertainty surrounding the passage of these bills has contributed to a 3.8 percent fall in the benchmark BSE stock market index since the start of October. The rupee, meanwhile, has shed all of its gains since the government launched its new economic reform drive in September.

Analysts attribute the fall to a host of factors, including the global downturn, a ballooning deficit and fears that the promised reforms may not be fully implemented. It was not clear on Wednesday whether the government would relent and allow the vote on retail reform to go ahead or if it would concede only to a motion allowing discussion of the move but not a vote, a less risky proposition.Singh's biggest coalition ally, the Trinamool Congress party, has withdrawn its support over the reform, leaving him in charge of a minority administration at a time when he is trying to revive growth in Asia's third-largest economy.

Trinamool is pushing for a vote of no-confidence in thegovernment during the winter session, which - if lost Ė could bring the government down and trigger a national election, well before it is due in 2014. For now, few opposition parties have the stomach for an early election, preferring instead to score political points by harrying a weakened government.But the highly fluid situation means nothing is certain."We expect a rocky ride," Citi Research said in an analyst note that questioned whether the government would be able to pass legislation given its minority status, despite its insistence that it has done the maths and has the votes.

The economic bills can be passed in parliament's lower house with the support of two big regional parties - the Samajwadi Party (SP) and Bahujan Samaj Party (BSP) - which are not part of the ruling coalition but often give it support in parliament.

However, the SP has previously opposed the pension and insurance bills while the BSP is keeping its cards close to its chest.

The government is in a minority in the upper house, so support from the opposition BJP is crucial there. But analysts say its unlikely the BJP will be willing to help its rival, which mean the

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