India: Crunch time for economic reforms

It's crunch time for economic reforms in India, as slowing growth and persistent corruption allegations threaten to make Prime Minister Manmohan Singh's United Progressive Alliance (UPA) unelectable in the upcoming 2014 polls.

With only 13 days left in the current session of parliament, Singh and his Congress Party are hoping to push through six important economic reforms, as well as silence opposition to the move to open up the retail sector to companies like Walmart. However, the UPA lacks the numbers to ensure speedy passage of any of the proposed bills, reports the Hindustan Times.

World business leaders will be looking for clarity on several proposals that could make India a more attractive investment destination, including proposals to raise the caps on foreign direct investment in the insurance and pension sectors–both extremely popular to multinational corporations due to India's massive population. But there are also bills that could have immediate impact on India's economic growth–which slowed to a measly 5.3 percent in the quarter ended Sept. 30. Most important among these is a proposed reform to India's land acquisition laws, intended to protect ordinary Indians from unfair applications of eminent domain but also to make it easier and faster for companies that need to acquire farmland to build factories.

The insurance (amendment) bill proposes raising the FDI cap in insurance to 49 percent from 26 percent. Introduced in India's upper house in 2008, it still faces opposition from the BJP, Left and others, according to the HT.

The pension fund bill proposes allowing up to 26 percent FDI in pension and social security products. Introduced in 2011, it has a good chance of passing after the government accepted amendments proposed by the BJP, says the paper.

The companies bill proposes new norms for corporate governance, making independent directors more accountable, and granting more power to shareholders. Introduced in 2009, it is also likely to pass as several recommendations from the standing committee have been incorporated into the new version.

The banking laws (amendment) bill would empower the central bank to supersede banks' boards, as well as pave the way to granting licenses to new private banks. Introduced in 2011, it also stands a good chance of passing, with limited oppostion from the BJP.

The land bill would clarify India's policies on land acquisition, defining the conditions under which the state can acquire land from villagers or farmers–making clearer exactly what kind of industrial or infrastructure projects constitute "the public good." Introduced in 2011, this one is contentious and unlikely to pass, as the final version is still awaiting cabinet approval.

The food security bill proposes to legislate "the right to food," and therefore mandate the distribution of subsidized food to about 70 percent of all Indians. Introduced in 2011, it's unlikely to pass during this session. Not only are experts still wrangling about how the increase in subsidy might work and how it would affect the treasury and the overall economy, but also opposition parties are probably not too keen on seeing their enemies start giving free food to 70 percent of voters so near to an election. (For Singh's Congress, the food bill could be as big as its previous move to guarantee 100 days of paid employment to the rural poor).