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| Expectations running sky high | | | In the times of recession and global meltdown, the celebrations at the Dalal Street in Mumbai Monday morning was a rare thing to be seen in several years. The celebrations were to mark a sudden shot up in the sensex on the arrival of a stable government in New Delhi. Going by the reactions of the business community as well as others across the country, expectations from the new government are sky high. One could almost hear the collective sigh of relief in business and trade circles on Saturday when it became clear that Dr Manmohan Singh’s new government will no longer be dependent on the support of the Left parties for its survival. No one in their wildest imagination had expected the Congress and its allies to come back to power with such a large number of seats that the support of many of its allies would become redundant and that they would be left chastened. This sense of stability in the government was something that many people across the country had long hoped for. Corporate India has a long wishlist: it expects an avalanche of reforms to be announced without much loss of time. It points out that with the market-unfriendly Left out of the way, the government has no excuse left for not pushing ahead with reforms. There is an expectation that there will be an immediate inflow of funds from foreign institutional investors, who had been waiting on the sidelines for several months to see what kind of government would be voted into power in India for the next five years. It is expected that among the things high on the government’s agenda will be disinvestment in non-profitable public sector undertakings, further liberalisation of financial services, particularly in the banking sector and on the question of ownership, raising of the cap on foreign investment in the insurance sector to 49 per cent, liberalisation of the retail sector and further movement towards full capital account convertibility. But there is a parallel view, both within the government and outside it, that while economic reforms must move ahead, the social impact of any proposed change — particularly on the millions of poor and marginalised Indians — must be taken into account and that the government should not move too fast in allowing foreign ownership of nationalised banks and insurance companies. Proponents of this viewpoint note that the West had run its banks to the ground because there was little monitoring or control over the misuse of financial instruments by some greedy and reckless bankers, forcing the governments of these countries to spend trillions of dollars to rescue these banks, which virtually amounted to nationalisation by the back door. The banks which have survived the crisis in the United States are those which deal purely with banking services. India, they point out, is vastly different from most countries in the West and it would be foolhardy and possibly fatal to transplant systems in use there without considering whether they would suit conditions in this country. While it is undeniable that the government is in need of funds both for infrastructure development as well as other sectors, it is argued that, in addition to a greater inflow of foreign funds in the insurance sector, a strong bond market is imperative.
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