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India Inc wary of alliance with Left parties

BS Corporate Bureau in New Delhi/Mumbai | May 14, 2004 09:44 IST

With the Communist parties set to join the next ruling coalition at the Centre, industry has been cautious in welcoming the return of the Congress to power.

Several businessmen felt that the Left parties could make the Congress go slow on the next generation of reforms including divestment and liberalisation of foreign direct investment norms in sectors like telecom, civil aviation and retail.

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"Nothing should be done to reverse the economic progress if we have got to be recognised as an economic force in the world," Essar Group chairman Shashi Ruia said.

"Industry needs political stability to ensure a surge in economic development and growth," said Nasser Munjee, chief of the Bombay Chamber of Commerce and Industry.

But the first casualty is likely to be the divestment programme, with the Left parties taking a tough stand against the Atal Bihari Vajpayee government's sell-off agenda.

Outgoing Divestment Minister Arun Shourie had recently said the Centre could raise up to Rs 100,000 crore (Rs 1,000 billion) every year through divestment of its stake in public sector undertakings.

"It seems that privatisation will not move forward as same as that of the BJP," said Avinash Vazirani, chief investment officer (Asia and Africa), BNP Paribas Asset Management Company, the UK.

Playing down the fears of the divestment programme getting derailed, N Srinivasan, director-general-designate of the Confederation of Indian Industry, told Business Standard: "Progressive divestment policies should not suffer. There could be some issues regarding the pace and degree of emphasis. The Congress has a positive approach towards privatisation. But it will restrict it to sectors that will not get washed out if opened up. The party will have to decide on the divestment process like strategic sales, sale to private company or allowing foreign players."

On the opening up of the retail business for foreign direct investment, fears have been expressed that the new government may go slow on it.

"There could be some uncertainty about the FDI in the retail sector, but the Congress should realise the importance of foreign investment in the sector and formulate policies accordingly," said Vikram Bakshi, managing director of McDonalds and head of the CII retail committee.

The NDA in its manifesto had promised to allow 26 per cent FDI in the retail sector if voted back to power.

But the business tried to take heart from the CPI(M)'s pro-reforms agenda in West Bengal.

"There is no concern in industry on the Left being a part of the ruling coalition. The CPI(M) government has been active on the privatisation of the state-owned assets and attracting the FDI. In principle and practice, it cannot take a contradictory position at the Centre," said Amit Mitra, secretary-general of the Federation of Indian Chambers of Commerce.

Most businessmen were happy that the Congress had got a clear mandate. "I am happy that the country is not faced with a hung Lok Sabha. I look forward to the benefits the country and the economy will drive from a stable government," said Adi Godrej, chairman of the Godrej group.

"Political stability is an essential ingredient for economic growth, all parties and their leaders understand that," said Rajeev Karwal, managing director of Electrolux India.

"I am sure even with the Congress-led alliance the reforms process and good socio-economic initiatives will not suffer," said Rajeev Karwal, managing director of Electrolux India.

"I expect that the new government will give impetus to the economic reforms being undertaken earlier," said Vinod Mittal, managing director, Ispat Industries Ltd.

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