x Abu Dhabi, UAEWednesday 17 January 2018

Political ruckus over corruption stalls India reforms

Two long-stalled reforms were to be introduced in the legislature in the past week but have been sidetracked by a political storm.

India's finance minister Palaniappan Chidambaram.
India's finance minister Palaniappan Chidambaram.

NEW DELHI // A parliament again deadlocked over corruption threatens the finance minister's ambitious reform agenda, dealing a harsh dose of political reality in the aftermath of his roadshow to North America to sell the India story.

Two long-stalled reforms - one to lift the foreign ownership for insurers to 49 per cent from 26 per cent and another that would simplify land acquisition for factories - were to be introduced in the legislature in the past week but were sidetracked by the political ruckus.

With opposition parties disrupting parliament and questioning investigations into multi-billion-rupee scandals related to allocations of telecoms airwaves and coal mines, there is no guarantee the bills will be passed during this session, which ends on May 10.

Palaniappan Chidambaram promised investors during his roadshow in Boston, New York, Ottawa and Toronto to get the bills on insurance and land reform passed in the current session, hoping their passage would boost investment from its lowest growth in eight years and help spark an economy growing at its slowest in a decade.

"If we can pass the land bill, if we can pass the insurance bill and if we can pass the Goods and Services Tax bill, that will be an accomplishment of this parliament," Mr Chidambaram said last week, appealing for bipartisanship on economic issues.

Mr Chidambaram is increasingly spoken of as a future prime minister if the Congress party retains power, although he denies any such ambition.

While the main opposition Bharatiya Janata Party (BJP) has agreed in principle on land reform, it has refused to back the insurance bill, and with national elections due by May 2014, it is not in a mood to compromise.

"Chidambaram is misleading," BJP spokesman Prakash Javadekar said.

"The government is in its last days of office. They cannot bring the economy back to health."

New Delhi's poor record of delivering on promises, coupled with myriad regulatory hurdles, including high-profile tax battles with foreign companies such as Vodafone and Royal Dutch Shell, has driven investors away.

Mr Chidambaram warns sceptics against underestimating his ability to deliver, pointing to his success in reining in a bloated fiscal deficit and carrying out fuel, retail and aviation industry reforms.

No one had thought fractious coalition politics would let him drive through those reforms, but the benefits are already evident.

Etihad Airways last week made a Dh1.39 billion investment in India's Jet Airways, a deal that was made possible by the rule change and was helped along by the government.

Luck also seems to be favouring Mr Chidambaram, with India getting a boost from the correction in global oil and gold prices, easing its import bill and current account deficit.

But with the election fast approaching, the noise in parliament is getting shriller by the day, making it difficult to carry out meaningful legislative business.