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Indian PM raises hopes of fresh economic reforms

Published Jul 01, 2012 06:52am


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Indian Prime Minister Manmohan Singh. — Photo by AFP/File

NEW DELHI: Investors are hoping India's Prime Minister Manmohan Singh, whose radical reforms transformed the country's economy two decades ago, can work his magic once again after he took charge of the finance ministry.

On Friday investors drove the benchmark Sensex share index to a two-month high, spurred by hopes that the 79-year-old could put the mojo back into India's once-booming economy, after growth slumped to its slowest pace in nine years.

“He's got the economy's pulse. There's a lot of hope building that he will take some right steps,” Amisha Vora, joint managing director of one of India's top brokerage houses, Prabhudas Lilladher, told AFP.

A survey of India's top 150 chief executives carried out by business group Assocham found expectations of “renewed energy being infused” into the economy since the ex-World Bank economist took control of the finance ministry last week.

Singh, who replaced veteran politician Pranab Mukherjee after he stepped down to run for India's mainly ceremonial presidency, has already spoken of the need to revive the economy's “animal spirit”.

“We need to work to get the economy going again and restart the India growth story,” Singh told senior finance ministry officials last week, calling for a reversal of the climate of pessimism.

As finance minister in 1991, Singh ignited the fuse for rapid growth as India teetered on bankruptcy, by embracing free markets and cutting through suffocating red tape.

Many had hoped that as prime minister he would execute a “second-generation” of changes to propel growth into double-digits and allow hundreds of millions of Indians to escape poverty faster.

But his Congress Party-led coalition has dismayed investors by being unable to push through planned reforms due to opposition from within and a string of multi-billion-dollar corruption scandals.

While his rallying cry last week improved business sentiment, analysts say he must now find the deeds to match his words.

“He will have to walk the talk and there will have to be a political sign-off from coalition allies on his actions,” CLSA economist Rajeev Malik told AFP.

The prime minister has already signalled India may back away from moves that have rattled foreign investors, including efforts to aggressively tax past transactions involving companies like British phone giant Vodafone.

“If Singh reversed even the Vodafone decision, that would restore tremendous foreign investor confidence in India,” Deepak Lalwani, head of London-based investment consultancy Lalcap, told AFP.

Analysts say Singh could stay at the helm of the finance ministry until November before naming a permanent replacement for Mukherjee, in order to help put the economy back on a reform track.

Global ratings agencies have warned they may downgrade India's debt to junk status with the economy reeling from high fiscal and current account deficits and stubbornly strong inflation.

The economy grew by 5.3 per cent between January and March as industrial growth slowed to a crawl. The rupee has lost a quarter of its value against the US dollar over the last 12 months to hit record lows.

Among the initiatives analysts are hoping for is the revival of plans to allow foreign supermarkets, such as US giant Walmart, to own 51 percent of Indian operations that could bring billions of dollars in investments.

Others include the simplification of land acquisition for industrial projects and permitting foreign airlines to buy up to 49 percent of domestic airlines, which could help the cash-strapped aviation sector.

Singh, who is not expected to continue as prime minister after the 2014 elections, is keen to protect his reputation as the father of India's economic reform, analysts say.

His personal reputation has taken a beating during the government's second term, with critics describing him as the dithering captain of a rudderless administration.

“This is a golden chance for him to erase the damaging things that have been said about him - that he has been a very weak leader,” said Vora.

“He would not like to retire with the reputation of the man who brought all those economic reforms (in 1991) but who then ended his career by screwing up the economy.”


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Comments (9) Closed

rp singh Jul 01, 2012 12:42pm
Manmohan Singh is still young enough to match many young economists
Sanjeevroy3 Jul 01, 2012 05:39pm
Yes he is a honest person. However India needs a hardliner. Who can resolve corruption. Put India forward and stand up to to terrorist nations. Economy will evolve on it own. Provided you have a good finance minister.
A.Bajwa Jul 01, 2012 10:07am
It is just a question of deregulating and opening up the economy.Pakistan can do it without having a genius PM.
raika45 Jul 02, 2012 02:19pm
Pakistan can do it without a genius PM? Then please tell me why is Pakistan's economy in the doldrums? Unless you are trying to create a cheerful joke here.Something that Pakistani people really need.
manghirmalani Jul 01, 2012 11:06am
Agreed- You are right . Younger brilliant people have to come and wear Dr Singh's shoes
KhanChangezKhan Jul 01, 2012 08:35am
No doubt tha tMr. Manmohan Singh has done most of his responsibilites in a well manner but he is now of 79 years therefore it is time for him to go back home in a deep rest and provide chances to youngers who might could do more better than Mr. Singh. In a real democracy it is must to bring changes in all sorts of lives. How do we know that someone is not better than those who are governing the country. Democracy is not that a single or dual party shoud only run the country having support of small political parties providing inlawful money or positions to individuals of the supporting political parties. The country low makers must beapproved a decree of maximum retirement life of individuals for political parties too similar to the other organizations. Now one is above the low, whoever may be!
Sadruddin Mitha Jul 02, 2012 12:45am
My only humble request to Man Mohan Sing is to please go home and rest. He is fragile, feeble, and indecisive, and can do nothing to stop the rot congress is in. He is a flop and total failure, and if he remains, I am concerned, he will doom India and corruption will be No!1 game in India and will top the world and all achievement will be washed away in a twinkle. Let Sushma Sawaraj take over and do some hard work and get India back on track. His days are definitely over, he knows it. a partay that solely dependes on a foreigner for advice and guidance as if one billion Indians are not enough to lead their country, I appeal soniaji to please lleave India alone
rejoy Jul 02, 2012 01:38pm
well i dont see them doing it
Saad (DXB) Jul 02, 2012 03:11pm
All those who have a problem with Manmohan Singh's age, let's not forget that Warren Buffet is active as a Hawk and is in his mid 80s. It's funny how Warren was treated as a full blown celebrity on his visit to India a few months back, with many channels struggling to get a few minutes of his time for an interview, but when it comes to your Home Grown Genius, you are ridiculing him.. This is extremely sad and ridiculous. I wish Pakistan had a brilliant economist like Manmohan Singh at the helm of our economic affairs