Electoral Verdict to Spur Reforms

With the return of the Congress government to power and with Dr. Manmohan Singh set to continue as Prime Minister, corporate India is likely to witness a series of reforms in the near future. Unlike the previous stint where the Government was hamstrung by coalition politics (but nevertheless achieving a record rate of economic growth), the reforms are likely to be bolder this time around as it appears to largely have a free hand in policy-making. Industry has given its thumbs up to the verdict and the markets are likely to witness a steep climb on Monday when they open for trading, signalling the acceptance of the electoral result.

As far as matters focused on by this Blog are concerned, the key outcome could be the enactment of reforms to company law. The Companies Bill, 2008 was introduced in the Lok Sabha on October 23, 2008. It seems not to have gained much traction since then as that was followed by the Mumbai attacks in November 2008 when the attention of law makers was diverted to more pressing concerns such as safety and security of the country (and rightly so), after which the election process put the issue to the backburner. The issue will hopefully be brought to the forefront so as to achieve an overhaul of Indian company law, which has been pending for over a decade now.

At a broad level, other issues on the agenda include the clarification of the tax regime for limited liability partnerships, finalisation of merger control provisions under competition law and streamlining of the foreign investment policy of the country (particularly with reference to the sectoral limits on foreign investment). This column in the Mint sets out a more detailed list of the key tasks ahead for the new government in terms of economic reforms. Finally, another event that would be viewed with a great sense of anticipation is the full Budget which, reports suggest will be presented in the Parliament session beginning in June (note that the Government had only presented an Interim Budget prior to the elections).