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India parliament reopens to grapple with major reforms

India's parliament reopened but opposition politicians forced a shutdown within minutes. -Reuters

Mon, Aug 01, 2011

NEW DELHI - India's parliament reopened on Monday but opposition politicians forced a shutdown within minutes, a sign that little progress is likely to be made in passing reforms to accelerate growth in Asia's third-largest economy.

The renewed political bickering came as a top economic advisory panel warned of slowing growth, cutting the annual growth forecast to 8.2 per cent from 9 per cent.

During the five-week-long session, the government hopes to introduce bills including those to streamline multiple taxes into a goods and services tax (GST) and to boost payouts to poor villagers from industrial projects developed on rural land.

Almost at the start of the session, members from the main opposition Bharatiya Janata Party (BJP) left their seats and ran towards the speaker's chair, shouting slogans.

They vowed to maintain pressure on the coalition government of Prime Minister Manmohan Singh and his Congress party, which is mired in various corruption scandals, and forced an adjournment until Tuesday.

"It is our sincere desire that this session runs smoothly and parliament should discuss all issues of national importance.

The government is quite prepared for any subject which the opposition would like to be taken up," Singh said at the start.

Should the reform proceedings be further delayed, the risks to India's economic growth prospects could sharpen, with India's Economic Advisory Council warning of slowing growth and lingering high inflation.

External factors and reforms "are the two factors that will be important for India's growth outlook beyond the next two to three quarters of slowdown," said Morgan Stanley's Chetan Ahya in a research note.

"While external factors are unpredictable, the government needs to ensure that it initiates the policy reforms needed to lift private investment," said Ahya, cutting his growth forecast for India to 7.2 per cent in 2011/12 from a previous 7.7 per cent.

The wish list of new laws includes allowing foreign investment in supermarkets, freeing fuel prices, slashing subsidies and reforming loss making state-run utilities.

Despite obvious economic benefits, most political parties in India fear reforms may alienate a core voter base amongst farmers and the rural poor.

Protests and land squabbles have held up major projects including a proposed $12 billion steel mill by South Korea's POSCO and plans for tens of thousands of apartments outside New Delhi.

The land bill, along with other proposals to share mining royalties with local communities and to expand a scheme to give cheap food grains to the poor, is pivotal to Congress' chances of cementing support among its rural voter base ahead of national polls in 2014.

India is also watching the progress of a tough anti-graft bill after a string of scandals including a multi-billion dollar telecoms scam.

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