Monday, May 31, 2004

A Bad Omen in India

It's looking like the new Congress-led coalition won't be quite the engine for positive change that many had hoped it would be, despite being headed by Manhoman Singh.

India's new government has scrapped key elements of its predecessor's privatisation programme.
The communist-backed coalition, led by the Congress party, said in a policy statement that it would not sell off profitable state-run firms.
Privatisations of loss-making firms would be decided "case-by-case".
Last week, Indian share prices posted a near-record slump amid fears that the new coalition would reverse the BJP government's economic reforms.
The prospect of slower progress on reform has also spooked foreign investors, who have sold some $800m worth of Indian shares so far this month.
Privatising some of India's profitable state enterprises in the energy and heavy engineering industries formed a central plank of the BJP government's economic agenda.

[............]

Economists said the new coalition's economic blueprint could put India's already overstretched public finances under added pressure.
"How will the increased spending on education be funded?" said Kishlaya Pathak, economist at Standard Chartered Bank.
"This is crucial because our fiscal situation is a matter of concern."
India's central government deficit stands at about 5% of gross domestic product, prompting warnings that the country must do more to balance its books.
There are fears that without the proceeds of further privatisations, or deep public spending cuts, the budget black hole could widen sharply.
At moments like these I feel my cynicism about the dubious benefits of granting illiterates the vote most keenly; the BJP was thrown out of office for supposedly neglecting the poor while enabling a small class to grow rich, but if the communists succeed in obstructing further reforms, all Indians will stagnate together ... I guess it really is true that misery loves company.