In­dia’s eco­nomic re­form agenda hits road­blocks


In­dian Prime Min­is­ter Naren­dra Modi’s am­bi­tious re­form agenda has stalled with cru­cial bills stuck in In­dia’s par­lia­ment, which ended its latest ses­sion this week in bit­ter up­roar.

Af­ter sweep­ing to power 15 months ago in a land­slide elec­tion vic­tory, Modi’s right-wing gov­ern­ment promised a string of busi­ness­friendly re­forms to at­tract for­eign in­vest­ment and re­vive the econ­omy.

But the op­po­si­tion has blocked flag­ship tax and land re­forms with rowdy protests in par­lia­ment, while a much-touted plan to over­haul ar­chaic la­bor laws has yet to be un­veiled.

A year af­ter Modi’s first In­de­pen­dence Day speech, hailed as a po­lit­i­cal tour de force, an­a­lysts say he risks fail­ing to de­liver on his prom­ises.

They will be closely watch­ing his sec­ond on Satur­day for signs that his right-wing gov­ern­ment is still com­mit­ted to push­ing through re­forms.

“PM Modi promised he would quickly change the econ­omy and get GDP growth back on track,” said Satish Misra, a se­nior fel­low at the Ob­server Re­search Foun­da­tion think tank in New Delhi.

“Peo­ple now have a lot of doubt about that. He promised more than he could de­liver,” he told AFP.

The prime min­is­ter this week ac­cused the main op­po­si­tion Congress party of hold­ing back the econ­omy for its weeks-long protest in par­lia­ment to de­mand rul­ing Bharatiya Janata Party (BJP) lead­ers re­sign over graft al­le­ga­tions.

The gov­ern­ment is des­per­ate to pass a bill paving the way for a land­mark na­tional sales tax to re­place a myr­iad of com­plex state and na­tional levies and boost the econ­omy.

But it failed to se­cure enough back­ing and now faces a huge strug­gle to meet a dead­line of next April, the start of the fi­nan­cial year.

Com­pa­nies say sim­pli­fy­ing In­dia’s un­wieldy tax sys­tem would make it eas­ier to do busi­ness in a coun­try clogged with red tape, boost­ing pro­duc­tion and growth.

Fi­nance Min­is­ter Arun Jait­ley ac­cused Congress of ig­nor­ing the na­tional in­ter­est over the goods and ser­vices tax, be­fore par­lia­men­tary de­bate de­scended into per­sonal in­sults.

An­a­lyst Misra blamed Modi and his se­nior min­is­ters for fail­ing to ad­e­quately ne­go­ti­ate with the op­po­si­tion to re­solve the im­passe in par­lia­ment — where the BJP lacks a ma­jor­ity in the up­per house.

“The (op­po­si­tion) tac­tics we are see­ing in the par­lia­ment are not new. We have seen them for the past 20 years,” he said. “It’s the gov­ern­ment’s re­spon­si­bil­ity to un­block these log­jams but noth­ing is mov­ing.”

The gov­ern­ment has back­tracked on another stuck bill meant to make it eas­ier to buy land for in­fra­struc­ture and other de­vel­op­ment projects, fol­low­ing mass protests led by Congress.

Com­pa­nies com­plain that frus­trat­ing ne­go­ti­a­tions over pur­chase of land has held up bil­lions of dol­lars worth of projects, some­times for years.

Congress says the amend­ments, in­clud­ing scrap­ping a need for con­sent of 80 per­cent of landown­ers for some projects, would hurt mil­lions of poor farm­ers.

Congress, hu­mil­i­ated at last year’s gen­eral elec­tion, has been re-en­er­gized by the is­sue ahead of a crit­i­cal elec­tion in Bi­har state later this year.

Moody’s and Fitch unit BMI Re­search have warned such prob­lems in im­ple­ment­ing big-ticket re­forms were ag­gra­vat­ing in­vestor con­cerns.

In­dian cen­tral bank gover­nor Raghu­ram Ra­jan also called for clar­ity on the stalled bills, telling Bloomberg TV that leg­isla­tive ac­tion “would send a strong mes­sage to the out­side that In­dia is still on the move.”

An­a­lysts urged Modi to use Satur­day’s speech, de­liv­ered from Delhi’s his­toric Red Fort, to de­tail how and when he plans to de­liver on a plethora of re­forms an­nounced since tak­ing of­fice.

“Give us a de­tailed re­port card on the over­abun­dance of schemes that have been an­nounced since May 2014,” com­men­ta­tor Gur­cha­ran Das wrote in the Times of In­dia this week.

The gov­ern­ment de­fends its per­for­mance, say­ing for­eign di­rect in­vest­ment rose to US$31 bil­lion last fi­nan­cial year, with firms such as Tai­wan’s Fox­conn, the maker of iPhones, this month pledg­ing US$5 bil­lion to build fac­to­ries.

“We are work­ing on a num­ber of other re­form mea­sures and hope­fully we will be able to push those along faster,” ju­nior fi­nance min­is­ter Jayant Sinha told In­dia To­day TV.

The econ­omy grew 7.5 per­cent for the first three months of this year, out­per­form­ing China’s. But ex­perts warn re­forms are needed to at least main­tain that pace to cre­ate jobs for In­dia’s mil­lions of young peo­ple.

Sonal Verma, chief economist at No­mura, said in­vestors were re­as­sured by some ini­tia­tives al­ready in­tro­duced, in­clud­ing coal auc­tions to re­place a cor­rup­tion-hit sys­tem of al­lo­cat­ing min­ing li­censes. And some states were go­ing it alone on re­forms in­stead of wait­ing for the na­tional gov­ern­ment to act, she said.

“But the re­al­ity is that In­dia is the world’s big­gest democ­racy and ex­pec­ta­tions around re­forms have to be re­al­is­tic,” she told AFP.

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