FACTBOX - Proposed economic reforms in India

NEW DELHI Tue Mar 22, 2011 12:53pm IST

A customer looks at trousers at one of the retail outlets of in Mumbai March 10, 2010. REUTERS/Arko Datta/Files

A customer looks at trousers at one of the retail outlets of in Mumbai March 10, 2010.

Credit: Reuters/Arko Datta/Files

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NEW DELHI (Reuters) - India's government introduced a wide-ranging tax bill into parliament on Tuesday, but opposition to the move threatened to derail what is one of the ruling coalition's most ambitious reforms of its second term.

Here are some of the main reforms that the government plans:

GOODS AND SERVICES TAX

Finance Minister Pranab Mukherjee on Tuesday introduced a bill to usher in a single nationwide tax structure, a proposal that will cut business costs and boost government revenue.

But officials have said the politically controversial measure will miss its April 1, 2012 deadline.

The proposal, first mooted in 2007, is two years behind its original schedule for rollout in 2010, on resistance from several states and the main opposition Bharatiya Janata Party (BJP).

Bringing in the GST requires an amendment to the constitution, which needs approval from two-thirds of lawmakers and of half of 28 states. Congress needs the BJP's support for these numbers.

In a sign of how political battles play into economic reforms, Prime Minister Manmohan Singh has suggested the BJP's continued opposition to the GST was retaliation against the CBI arresting a minister in BJP-ruled Gujarat state on charges of murder.

STATUS: The bill will go to a standing committee, which will send it back with recommendations. The government is not bound to accept the suggestions. The earliest the bill can be made law is during the next session of parliament, likely in July.

LAND ACQUISITION

India proposes to make it easier to acquire land to set up factories, mines, roads and power plants, resolving one of the biggest barriers for sustained double-digit growth.

The new laws will give market or better prices for the land and equity shares in the venture to land owners, hacking away at the cause for the several violent protests over inadequate compensation that have characterised land acquisition in India.

India's colonial-era land acquisition law in force gives the government the right to take over any land for what it deems a "public purpose" with little compensation, leading to widespread opposition to almost any project that requires land.

Analysts warn India's near 9 percent annual growth may be at risk if it does not quickly build up its infrastructure and set up factories that can pull out the hundreds of millions of its people from the low-productivity farm sector and from poverty.

Several projects, including multi-billion dollar investments by steel majors like ArcelorMittal, Posco and Tata Steel, have been delayed by these protests.

The bill was passed in 2007 by the lower house of parliament, but lapsed when parliament was dissolved for the 2009 federal elections.

STATUS: The government plans to introduce and refer the legislation to a standing committee during the current session. The earliest it will be passed is in the next session of parliament, likely in July.

RETAIL REFORMS

India is close to a decision on allowing foreign investors to enter the lucrative supermarket sector, Trade Minister Anand Sharma has said, a move that has been opposed by the politically vocal small-shopkeeper lobby.

If the proposal goes through, global firms like Wal Mart and Carrefour could set up hundreds of stores to tap the $450 billion market. Current rules restrict them to the wholesale, cash and carry business.

It is also expected to ease the massive supply-side bottlenecks in the farm sector that have contributed to keeping food prices and inflation stubbornly high.

FINANCIAL SECTOR REFORMS

The government aims to lift caps on foreign stakes in the banks, pension and insurance sectors to broaden the penetration of the funds across the country and channel savings into much needed infrastructure projects.

But there is widespread political opposition to the proposals and several bills that seek to open up the sectors have been languishing in parliamentary standing committees or have lapsed.

STATUS: The government has not indicated when it will reintroduce the bills.

(Compiled by C.J. Kuncheria)

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