The markets on Thursday cheered the end of the stalemate in Parliament with the Bombay Stock Exchange’s widely-tracked 30-stock index Sensex closing above 19,170, a level last seen in April 2011. Investors have been apprehensive about the United Progressive Alliance’s ability to deliver resurrected reforms and the prospect of lawmakers voting on foreign supermarket chains in the country — with indications that the government has mustered the numbers — should lay some of their deepest fears to rest.
The Congress has been on a high-decibel mission to revive flagging investments in a slowing economy. It seems to be working. Moody’s this week said the outlook on its rating for India was stable despite an earlier warning by Standard & Poor’s of the likelihood of a downgrade to junk status. Also the external environment has turned a wee bit less inimical with the US moving closer to resolution of automatic spending cuts and tax increases from the New Year and Greece arriving at a debt buyback deal with European Union and International Monetary Fund creditors.
Reforms stalled in the legislative circuit are vital for the country to avoid a ratings downgrade. Stuck in the pipe are laws allowing more foreign investment in insurance and pension funds. The hope now is that some of the Opposition sting will ebb once the vote on foreign direct investment in retail chains is out of the way. The parliamentary logjam was affecting not just pending reforms but also the pace of decision-making within the government. Repeated disruptions were feeding into a policy paralysis over a spate of corruption charges like the one over allotting telecommunications licences.
In September, the Congress decided to take the fight to the Opposition on a host of issues, including higher prices for fuel. Finance minister P Chidambaram has committed himself to tax reforms, speedier clearances for infrastructure projects and a radical cash transfer for subsidies. The government’s message is that it now wants to make up for lost time in setting the economy aright. The markets seem to be listening.