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Friday, October 22, 1999 Published at 17:55 GMT 18:55 UK


World: South Asia

Analysis: Upping the pace of reform

Legislation for the insurance sector is high on the agenda

By South Asia business editor Sumant Bhatia

In the first week of the new parliamentary session, the Indian cabinet has been busy preparing economic legislation.

Indian Elections 99
Full results
Reforms to the private insurance and telecom sector have been released, as well as plans to prevent money laundering and to allow risky futures trading for the first time.

But are the measures a sign that the pace of reform has been stepped up, and that foreign investment will flow into the country?

Insurance

The cabinet seems to have been working overtime this week to release its proposals for parliament.


Ashish Pitale: "It indicates that a strong reform agenda that is likely to be carried forward"
First came the long awaited legislation to open up the insurance sector. If passed it will allow foreign companies to hold up to 26% stakes in insurance firms.

Ashish Pitale, head of research at bankers JP Morgan in Bombay, says the bill is highly symbolic.


[ image: Markets have reacted positively]
Markets have reacted positively
"This has been considered an area that would not be easily opened up for foreign investment," he says.

"If this bill does become law, it indicates that there is indeed a strong reform agenda that is likely to be carried forward," he adds.

But others are not quite so evangelical about reforms.

Caution

The telecom migration package will mean private companies in the sector will pay more realistic fees for their licences, and the length of those licences will be extended.


Virat Bhatia: Competition should be safeguarded and disputes resolved effectively
Virat Bhatia of the American giant AT & T says the measures will see more overseas investment, but much more still needs to be done.

"We want to see legislative reforms wherein the regulator's powers are enhanced...to make sure that the competition is safeguarded and disputes are resolved in an effective manner," he said.

"These are very obvious powers which almost every other regulator in the world enjoys," he said.

With the BJP-led government in India enjoying a more stable majority in the new parliament, more reform measures that should open up the economy to greater competition are expected to be passed.

But how radical that reform process will be is still a a matter of debate.

Investors in the meantime are still piling in to India, as firms there continue to enjoy bumper profits, especially in the flagship software sector.

It has meant that share prices in Bombay have already risen an impressive 60% this year.



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