India waiting: Market wilting under government indecision
Moneylife Digital Team 18 July 2011

More than 80 Bills are pending since 2008. There is not much hope that they will see the light of day soon

The government has made a fantastic job of tabling Bills in Parliament and then sitting on them. While the scam-tainted government waits for the problems to dissolve themselves, its failure to implement important Bills and formulate policies seems to be giving the market a hard time.

Broking firm Macquarie Securities has released a report where it has analysed some of the crucial Bills and the factors that have affected India Inc's market performance. Not only have they found many of these Bills inadequate and that they have been watered down during revisions, the firm feels that there is "little hope" that the government will come to a decision any time soon.

"There has been a spate of policy decisions from the government lately that are aimed at clearing the pile ahead of the monsoon session of Parliament and the UP (Uttar Pradesh) elections next year. In our view the government has not fared well in making these decisions as some of them appear superficial," said the report.

Of the approximately 80 bills that are pending, three-quarters have built up over the past two years alone. Some of the important Bills and reforms pending are-Mines and Mineral Development Act that will see 26% of mining profits being shared with locals affected, Microfinance Institutions (Development and Regulation) Bill which has seen a deadlock between states and the RBI (Reserve Bank of India), The National Identification Authority of India Bill, the Bill on establishing a real estate regulator, amendments on banking laws & labour laws, the Direct Taxes Code, the Goods and Services Tax, pension reforms, FDI (foreign direct investment) in retail and reform in land acquisition laws.

The report has also commented on the government's attempts to project 'a semblance of activity'—like the Cabinet reshuffle and the states' power minister's conference.

"The only change of any significance was the replacement of Jairam Ramesh with Jayanthi Natarajan which was also reflected in the performance of stocks like Sterlite (STLT) and Coal India (CIL) in an otherwise unresponsive market. (As far as the) State power minister's conference (is concerned)—while it would certainly be a major positive for the sector—it should be noted that (the) Government power policy rarely gets implemented as planned. Most private sector participants appeared cautious about the implementation of such measures," says the report.

The few policies the government has formulated have failed to produce desired results. The government has failed to curb inflation, and another hike is expected from the RBI. The hike in fuel prices, which happened after almost a year of delay, is likely to add to the core inflation rate. The hike has offset the reduced subsidy with a revenue loss from duty cuts. The much-awaited draft Bill on food security was passed only recently, but the media is awash with all its shortcomings.

The country is already feeling the heat of governance deficit. If the indecision hits the market harder, the government has only itself to blame.

Comments
RNandakumar
1 decade ago
MMS is setting a new trend now. Daily going and signing the attendance register at Sonia's house and await orders from her for that days actions and non-actions. He has also beaten the record of Narasimma Rao as the most tight lipped PM. The power and post has turned a reputed administrator into a helpless puppet.
B V KRISHNAN
1 decade ago
When Manmohan Singh was made PM people in the country expected him to make fast progress in the reform road. But instead he focused on the Neuclear treaty and sacrificed the rest of the reform agenda on the altar of pleasing his masters in US.
Govind Gopal Shanbhag
1 decade ago
MLDT - If you take out the record of running of honorary parliament, no.of days non working are more than actual running. With some reason or other proceedings are disrupted and sessions are adjourned. For the last 4-5 years, where is the discussion on important budget which is passed on the last day as if the budget is not passed monetary system will collapse as nobody will have authority to spend.
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