As Left pulls out, India Inc. hopes for push to reforms (Roundup)

July 8th, 2008 - 7:46 pm ICT by IANS  

A file-photo of Manmohan Singh

New Delhi, July 8 (IANS) With the Left Front withdrawing support to the United Progressive Alliance (UPA) government Tuesday, India Inc. hopes the slow-moving economic reforms will now be put on the fast track. From key decisions pertaining to the financial sector to further opening up of the Indian economy to foreign investors, Prime Minister Manmohan Singh’s government had its hands tied down by the crucial support from Left parties.

These, the corporate sector feels, can now see the light, should the government survive following support from the Samajwadi Party. The SP has been known to be supportive of private sector when in it was in power in Uttar Pradesh.

“We look to the government with realigned political equation swiftly addressing economic situation and giving fresh impetus to the issues that will drive economic growth,” said Rajeev Chandrasekhar, president of Federation of Indian Chambers of Commerce and Industry (Ficci), a leading industry lobby.

“We look forward to Prime Minister Manmohan Singh’s promise of 8.5 percent economic growth rate being achieved,” he said.

India logged 9 percent growth rate in 2007-09. Experts have expressed doubts over the feat being repeated in the current fiscal against a 13-year high inflation at 11.63 percent for the week ended June 21.

“Ficci is concerned about declining business confidence in the economy, and is extremely worried about any deficit in governance emerging out of political conflict,” Chandrasekhar told IANS.

“The nuclear deal will now come to a logical conclusion. The economic reforms will re-commence,” said D.S. Rawat, secretary general of the Associated Chambers of Commerce and Industry (Assocham).

“For long, there has been a hide-and-seek game going on between the Left parties and the UPA government over the civilian nuclear deal with the US,” Rawat told IANS in one of the first reactions from the corporate sector.

An immediate reaction also came from the stock market where equities staged a smart rally and made up for some of the lost ground minutes after Communist Party of India-Marxist (CPI-M) general secretary Prakash Karat announced the withdrawal of support.

The sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which had lost 476.03 points in the morning, immediately cut its losses to 208.8 points, or by 1.54 percent.

“Left leaders were creating hurdles in implementing some decisions like foreign direct investment in insurance sector,” said D.H. Pai Panandikar, corporate analyst and former Ficci chief.

“The government can now think of opening up the insurance sector,” he said, adding one of the important issues, which the Left was consistently opposed to, was allowing 49 percent foreign investment in the insurance sector.

“The deal will also help India become energy-efficient,” said the president of the RPG Foundation, a Delhi-based economic policy think-tank.

Senior functionaries of the Confederation of Indian Industry (CII) were unavailable for immediate comment, but some members hoped the realignment within the dynamics of the UPA government would result in reforms being put back on track.

“The Left leaders were never creative in their approach about issues of national importance. They were acting more as activists than responsible coalition partners,” said Dalip Kumar, senior economist with the National Council of Applied Economic Research (NCAER).

“The pace of reforms, however, will depend upon the kind of support which the government now gets from its new allies like the Samajwadi Party,” Kumar added.

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