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Friday, 17 March, 2000, 12:03 GMT
Indian markets fear reform reversal

By Sanjeev Srivastava in Bombay

Indian market analysts have expressed concerned about the direction of economic reforms in the country, following pressure on Finance Minister Yashwant Sinha.

Opposition parties and allies of the BJP-led government in Delhi want Mr Sinha to roll back some of the reforms presented in his budget last month.

Bombay market
Index loses 200 points
Closes at 5102
Technology stocks down
Pharmaceutical and consumer goods stocks revive
One signal of economic nervousness is the Bombay stock market index, which has already shed nearly 20% from this year's high in the last few weeks.

The parliamentary debate on the budget has clearly established there is little political consensus on issues such as farm subsidies and privatisation of state-owned firms.

Finance Minister
Yashwant Sinha: Under pressure to undo reforms
Both measures were announced by the finance minister in his budget speech as major initiatives aimed to cut down wasteful government expenditure and reign in the ever burgeoning fiscal deficit.

But Mr Sinha is under fire from friends and foes alike even before the announcements become law from the beginning of the new financial year on 1 April.

He is already talking in terms of "respecting the views and concerns of friendly parties".

Simply put, he has clearly hinted at a roll back proposed subsidy cuts without saying that in so many words.

Negative step

According to observers, a retracting of budget proposals would be a regressive step in terms of controlling India's fiscal deficit.

It would also be seen as a major political embarrassment for the government and as a sign of weakness.

The Indian Government has been unable to convince even its allies about the economic prudence of these decisions.


Farmers are an important political constituency
It has faced all round flak in parliament for hurting the interests of the poor and the farmers, two of the biggest political constituencies in the country, by increasing food and fertiliser prices.

Similarly, proposals to sell state-owned firms have been described as a "sell-out" to the private sector by opposition parties, as well as the BJP's allies.

Market analysts are understandably nervous about these developments.

They were disappointed with the budget because it was not as tough on cutting government expenditure and subsidies as expected.

And if the measures announced were to be reversed, there could be serious concerns about the direction of reforms in the minds of Indian as well as foreign investors.
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See also:

03 Mar 00 | South Asia
Budget exposes divide
23 Feb 00 | South Asia
'Tough measures' needed for India
22 Oct 99 | South Asia
Analysis: Upping the pace of reform
29 Feb 00 | South Asia
Markets unimpressed by budget
04 Feb 00 | South Asia
Technology shares ride firm
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