Foreign investors warn against policy paralysis

Posted on    21 November 2011


Global investors and research agencies appear increasingly worried that the Manmohan Singh-led United Progressive Alliance (UPA) government, shaken by graft, will not push through policy reforms in critical areas to boost long-term growth in the world’s second-fastest growing major economy.



Research and broking firm CLSA in a report spared no punches in criticising the slow pace of India’s economic reforms, especially in the last few years.


“The government’s policy paralysis in the last year has added to the cyclical slowdown,” it said in a recent report. “UPA-II has been embroiled in corruption scandals and is balancing the trade-off between environment issues, corruption, growth and vote-bank politics.”


India's inadequate infrastructure is a major roadblock to the country’s target of achieving a 9.0%-9.5% annual growth in 2012-2017, global ratings major Standard & Poor's Ratings said in a report titled Can India's Developing Infrastructure Keep Pace With Economic Growth?



The report looks at key factors hindering the development of infrastructure in the country.


The government has stepped up infrastructure spending in recent years. Nevertheless, the slow pace of reforms and a lack of long-term funding options constrain the sector’s growth.


“We believe reforms to create a robust framework with transparent policies for project execution and funding will be critical to keep up the pace of infrastructure development in India,” said Rajiv Vishwanathan, credit analyst, Standard & Poor’s.


“Constraints in securing clearances, land rights, and long-term funding could cause companies to fall short of their targets,” it added.


The World Bank’s Ease of Doing Business ranks India at a lowly 132 among 183 countries. India fares poorly on key respects including enforcing contracts.


Last week, Reliance Industries Ltd (RIL) chairman Mukesh Ambani joined a growing chorus of experts urging the government to push through policy reforms in critical areas at a pace that matched people’s growing aspirations.

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