Parliament reopens to grapple with major reforms

NEW DELHI Mon Aug 1, 2011 4:41pm IST

A view of the Indian parliament building is seen on the opening day of the monsoon session in New Delhi August 1, 2011. REUTERS/B Mathur/Files

A view of the Indian parliament building is seen on the opening day of the monsoon session in New Delhi August 1, 2011.

Credit: Reuters/B Mathur/Files

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NEW DELHI (Reuters) - 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, lingering high inflation and significant challenges to meeting fiscal targets.

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 for industrial projects developed on farmland.

Almost at the start of the session, members from the main opposition Bharatiya Janata Party (BJP) left their seats and ran towards the upper house chairman, shouting slogans and forcing the house to be adjourned until Tuesday.

The BJP has demanded a vote to challenge the ruling coalition government of Prime Minister Manmohan Singh for its perceived mishandling of a spate of corruption scandals and high inflation, with the sparring likely to further disrupt proceedings till a compromise is reached.

"No answers have been given by him (Singh), no answers can be given by him, so he has sought to sidetrack the entire issue by attacking the opposition," Arun Jaitley, the BJP's leader in the upper house of parliament, told a news conference.

The ruling Congress has a slim majority and it would not want to risk a vote. The BJP has also in past sessions demanded such voting, but come around to agreeing to a simple debate.

Should the reform proceedings be further delayed, the risks to India's economic growth prospects could sharpen, with the prime minister's economic advisers warning of slowing growth, high inflation and challenging fiscal targets.

External factors, such as global economic outlook, 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 percent in 2011/12 from a previous 7.7 percent.

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.

(Additional reporting by Nigam Prusty; Editing by Daniel Magnowski and Yoko Nishikawa)

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