By Rajesh Kumar Singh and Manoj Kumar
NEW DELHI, April 29 An Indian Parliament
deadlocked yet again over corruption scandals threatens Finance
Minister P. Chidambaram's ambitious reform agenda, dealing a
harsh dose of political reality on the heels of his North
American roadshow to sell the India story.
Two long-stalled reforms - one to lift the foreign ownership
cap in insurers to 49 percent from 26 percent and another that
would simplify land acquisition for factories - were due to be
introduced in the legislature during the past week ended up
being side-tracked by the political ruckus.
With opposition parties disrupting parliamentary
proceedings, questioning investigations into
multi-billion-dollar scandals related to allocations of telecoms
airwaves and coal mines, there is no guarantee the bills will be
passed during this parliamentary session, which ends on May 10.
Chidambaram promised investors during his roadshow in
Boston, New York, Ottawa and Toronto to get the bills on
insurance and land reform passed in the current session, hoping
their passage will boost investment from eight-year low growth
and help spark an economy growing at its slowest in a decade.
"If we can pass the land bill, if we can pass the insurance
bill and if we can pass the Goods and Services Tax bill, that
will be an accomplishment of this parliament," Chidambaram said
last week, appealing for bipartisanship on economic issues.
Chidambaram is increasingly spoken of as a future prime
minister if the Congress party retains power, although he denies
any such ambition.
While the main opposition Bharatiya Janata Party (BJP) has
agreed in principle on land reform, it has refused to back the
insurance bill, and with national elections due by May 2014, it
is not in a mood to compromise.
"Chidambaram is misleading. The government is in its last
days of office. They cannot bring the economy back to health,"
BJP spokesman Prakash Javadekar told Reuters.
New Delhi's poor record of delivering on promises, coupled
with myriad regulatory hurdles - including high-profile tax
battles with foreign companies such as Vodafone and
Royal Dutch Shell - has driven investors away.
Foreign direct investment into the country fell 38 percent
in the 11 months through February. The Center for Monitoring
Indian Economy, a think tank, reckons new capital investment
announcements in the March quarter dropped 75 percent from the
same period last year.
Meanwhile, Indian companies are looking for greener
pastures. A government body expects outbound corporate
investment to rise about 45 percent in the fiscal year that
started this month.
DON'T WRITE ME OFF
Chidambaram warns sceptics against underestimating his
ability to deliver, pointing to his success in reining in a
bloated fiscal deficit and carrying out fuel, retail and
aviation industry reforms.
No one had thought fractious coalition politics would let
him drive through those reforms, but the benefits are already
Abu Dhabi-based Etihad Airways last week made a $379 million
investment in India's Jet Airways, a deal that was made
possible by the rule change and was helped along by the
government. Swedish retail chain Hennes & Mauritz said
it will spend about $130 million to open an initial 50 stores in
The cabinet committee on investment, which Chidambaram had
pushed to speed clearances for big infrastructure projects, has
approved $27 billion worth since January.
His success in controlling the fiscal deficit has also
pulled the country back from the brink of a ratings downgrade.
Luck also seems to be favouring Chidambaram, with India
getting a boost from the correction in global oil and gold
prices, easing its import bill and current account deficit.
But with the election fast approaching, the din in
parliament is getting shriller by the day, making it difficult
to carry out meaningful legislative business. Even colleagues
within Prime Minister Manmohan Singh's cabinet oppose some of
the reforms Chidambaram wants to make.
His plan to set up a coal regulator to decide the allocation
of coal mines and pricing of the fuel has run into trouble as
the coal ministry is not willing to cede its power.
Providing fuel supply linkages to utilities has become a
victim of a feud between the coal and power ministries. Plans to
free up prices of oil and gas drilled locally have been put on
the back-burner following a disagreement among ministries.
Similar opposition from his cabinet colleagues forced the
finance minister to boost public spending for welfare programmes
in this year's budget and accept a watered-down version of a
plan to fast-track major infrastructure projects.
Chidambaram, who has also courted investors on visits to
Asia and Europe, is planning to take his roadshows to Australia
and Qatar next month.
A failure to honour his commitments could not only dent
hopes for India's economic revival ahead of next year's
election, but could also take the shine off the Harvard-trained
Chidambaram's reputation as an investor-friendly "doer".
"The issue is that the roadshows have to be followed by
actions," said Sandeep Aneja, managing director at Kaizen
Private Equity. "Unless we show consistent reforms, we will not
see significant investment coming in."