Will the announced reforms be implemented?

All eyes are on the mood and tone of the Winter Session of Parliament. A plethora of changes are on the table and if the Monsoon Session is anything to go by, reformists will have a tough time


The Winter Session of Parliament, which begins on Thursday, will be a very important gauge as to the extent to which the announced reforms are being implemented. The direction of reforms in the coming months will depend on whether the ruling UPA government becomes stronger or weaker out of this winter session. This is the assessment of Nomura in its Asia Insights report.


Nomura does not see the UPA government at risk as the Congress has both inside (DMK, NCP, others) and outside (SP, BSP) support to tide over a no-confidence vote, in case the motion is raised, which itself is uncertain. The SP and the BSP are opposed to FDI (foreign direct investment) in multi-brand retail, but otherwise continue to support the government from outside. In terms of the reforms, Nomura expects the Companies Bill, Competition Bill, Banking Law and Forwards Contract Bill to sail through smoothly, but Insurance, Pension and Land Bills may face much more opposition.


Nomura’s worry is that even a discussion on FDI in multi-brand retail will lead to heated debates and could lead to disruption in parliamentary proceedings. If the debate on FDI in multi-brand retail is put to rest soon, there is hope that other reforms will also be passed. However, the Monsoon Session of Parliament did not inspire much confidence as the stand-off between the government and the opposition parties on issues of graft and corruption led to a complete washout of the parliamentary session. There is a risk that the Winter Session could go down the same road.


Media reports suggest that the TMC chief has not been able to gain enough support for the no-confidence motion, so the likelihood of the government falling is small. Instead, the government may choose to debate the thorny issue of FDI in multi-brand retail in parliament, as it is an executive decision and does not require parliamentary approval.


Pending reforms


According to Nomura, some of the reforms announced by the government since September 2012 that will come up for approval during the Winter Session of Parliament include:

  • Insurance Laws (Amendment) Bill: Increase the cap on foreign equity in insurance sector to 49% from 26% and allow foreign reinsurers to operate in India
  • Pension Fund Regulatory and Development Authority Bill: Set up a stronger pension regulatory body, and increase the foreign investment ceiling to 26%, or the limit in the insurance sector, which ever is higher.
  • Companies Bill (Amendment), 2011: Improve the standards of corporate governance.
  • Banking Laws (Amendment) Bill: Pave the way for the RBI to give new banking licenses to private participants in the sector.
  • Land Acquisition Rehabilitation and Resettlement Bill: To make the process of land acquisition transparent.
  • Direct Tax Code Bill: Simplify and consolidate the direct tax regime for individuals and corporates.
  • Forwards Contract (Regulation) Amendment Bill: To set up an independent regulator of the forward commodity markets and allow institutional investors and derivative instruments.
  • Competition Act (Amendment), 2002: To bring all sectors under the purview of the Competition Commission of India, except stressed banks or insurers.


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