INDIA’S government vowed on Wednesday (December 12) to press ahead with banking and other reforms after winning a parliamentary vote to let in foreign supermarkets – a key plank of its renewed change agenda.
Finance Minister P Chidambaram told reporters he hoped changes to banking rules would be approved this week by India’s fractious parliament to bring more foreign and domestic investment into the sector.
“I have discussed all five economic reform bills with two leaders of the opposition. They understand there is an urgent need (to pass them),” he said.
“I sincerely hope the principal opposition party (the Bharatiya Janata Party) will cooperate.”
The banking bill would allow the central bank to issue new banking licences to foreign players and major Indian conglomerates to set up new banks that could inject more competition into the sleepy, largely state-dominated sector.
The bill would also give the central bank more regulatory oversight over banks.
Other pending bills include plans by the fragile minority Congress-led coalition to open up the cash-strapped pensions and insurance sectors to more foreign investors and make it easier to do business.
The reform drive is seen as key to the government’s plans of kick-starting slowing economic growth and cutting the swelling fiscal deficit as it struggles to avert a downgrade by global ratings agencies.
The Congress party wants to get the economy growing more vigorously before it faces the electorate in general elections due in 2014.
The government, in the face of fierce opposition, won approval last week of its move to allow foreign supermarkets to operate in India as part of its bid to open up the still inward-looking economy to more investment from overseas.
But analysts say with global growth still sluggish they see no fast economic recovery as a result of the reforms.
Growth is languishing at three-year lows with India posting expansion in the most recent financial quarter of 5.3 per cent.
“Even with recent reforms and potential progress in the current parliamentary session, we expect no quick turnaround in the industrial and investment cycle,” said Jyoti Narasimhan, economist at research house IHS Global Insight.
This “will keep economic growth muted in the near term,” she added.
