Trust vote will see reforms come out of closet

July 23rd, 2008 - 5:14 pm ICT by IANS  

A file-photo of Manmohan Singh

New Delhi, July 23 (IANS) Armed with a comfortable victory in the trust motion, Prime Minister Manmohan Singh’s government was Wednesday ready to push forward some major economic reforms, especially in the financial sector, which were so far blocked by Left parties. Legislations to allow a hike in foreign equity in insurance firms, higher voting rights for foreign banks operating in the country and entry of private pension funds are some of the key areas of focus, officials said.

“We will make all out efforts to take economic reform process forward by passing a number of bills pending in parliament,” Finance Minister P. Chidambaram said, a day after his government won the trust vote.

“We have absolute majority,” the minister said, referring to the trust motion that was won 275:256. “We have to build on that and we will reach out to the parties which are not opposed to the reforms.”

One of the main legislations pending before a group of ministers is to increase the foreign investment limit in insurance sector from the present 26 to 49 percent.

Similarly, while foreign investors can acquire up to 74 percent in Indian banks, their voting rights - that translates into effective management control - has been limited to 10 percent. Industry wants parity in voting rights.

“We expect that in the next three months some major bills pending in parliament will also be pushed,” said Rajeev Chandrasekhar, president of the Federation of Indian Chambers of Commerce and Industry (Ficci).

“Once this flurry of reforms are undertaken, the confidence level which had been dropping over the last three quarters in the business confidence survey of Ficci will bottom out and will put the economy back into a growth trajectory.”

The president of the Bengal National Chamber of Commerce and Industries, K.K. Navada, expressed similar sentiments and said reforms were necessary to ensure the sustenance of growth that retarded slightly last fiscal.

There are other areas of reforms as well which industry, by and large, will look forward to - like allowing foreign equity in multi-brand retailing, relaxation of land ceiling for foreign realty developers and liberal labour policies.

“Now the government is under no obligation to placate the Left. Several reform measures like labour reforms and insurance reforms are due. These are needed to ensure inclusive growth and enable India Inc to compete internationally.”

The prime minister himself has told his interlocutors that he was looking at the new alliance partners for support in pushing some of the government’s important reforms in insurance, retail trade and pension requiring legislative changes.

In his speech during the trust motion - which he tabled after opposition protests preventing him from reading it out - Manmohan Singh said the Communist allies wanted him to behave like a “bonded slave”, reflecting his anguish at being unable to pursue reforms.

Sajjan Jindal, president of the Associated Chambers of Commerce and Industry (Assocham), says the trust vote should be seen as a major endorsement of the pragmatic policies pursued by the UPA government to build a strong India.

“We now hope the government and its new partners will vigorously pursue people- and industry-friendly reforms in the remaining tenure to fulfil its promises to Indian Inc and its people,” Jindal said.

Even stock market indices - often seen as an immediate reflection of the mood of the investing public - gave a thumbs up to the victory in trust vote, primarily sensing a major push to unfinished agenda for the corporate sector.

The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) opened more than 3 percent or 465 points higher Wednesday and was towards close of business, it was ruling 835 points or 5.9 percent higher over the previous close.

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