UPA Government started its second term three years ago by promising some key reforms. People kept high expectations on the government under the Manmohan Singh when they elected him for the second time. Since then the government took charge of the state but unfortunately some of the key reforms are still pending in the market. Below are those reforms that the market has been eagerly waiting for.
India has allowed 100 percent foreign direct investment in cash-and-carry and wholesale stores but FDI in multi-brand through 49 percent ownership has been blocked by allies and opposition parties. Players like WalMart, Carrefour and Tesco could directly enter market and provide more options for the consumers if this was allowed.
Indian market consists of 98 percent of unorganized retail sector. The unorganized sector is dominated by counter-stores and street venders who regard this as a career to survive. Unfortunately many of these retailers are uneducated, unskilled and they never have the means to improve or expand business and to develop the retail sector. Most of these retailers hardly have the support of consumers.
Looking at the long term and short term growth of retail in India, many business giants like Pantaloon Retail, Shopper’s Stop, and Reliance Retail etc. have entered the industry for almost a decade introducing organized retail markets. These giants supply products and services from small, medium and large entrepreneurs and manufacturers from all over India. They have also promoted many international brands in the markets. Many modern retail formats like malls, hypermarkets and supermarkets are common in all major cities now.
Organized retailing has been successful in foreign countries beside this the telecom industry of India has also witnessed profit with the introduction of multiple technologies, removal of market regulations and influx of capital. The penetration in telecom industry has risen from 1 percent to 10 percent now.
FDI in Insurance and Pension:
The government was expected to make amendments to the Insurance Laws (Amendment) Bill, 2008 and Pension Fund Regulatory and Development Authority Bill (PFRDA), 2011. But it has been pending for a quite long time now.
The implementation of FDI insurance can bring a good amount of foreign capital and better performances in the industry as FDI in pension promises an expanded fund management. The Foreign investment in both has been limited to 26 percent for long and the government has failed to make it to up to 49 percent.
The long pending insurance and pension fund reform initiative seems to have dropped by government due to the pressure from government allies and opposition parties. This has distanced the dream of easier foreign direct investment (FDI) norms in insurance and pension funds.
“Except the whole issue of FDI, there is no other major problem with the insurance Bill. Given the political compulsions, FDI will be 26 percent. There is no other choice. It is a political call, “said, a top finance ministry official, who refused to be identified, as reported by live mint .com.
The increasing petrol prices have been a major issue in our country. In order to make a radical change in its price a deregulation is much needed. Petrol has officially been deregulated but the government has not shown courage to deregulate the diesel, kerosene and LPG prices because of political issues. The deregulation of petroleum products will be beneficial in the long run since it provides the possibility of competition and a price decrease.
The governments bar on members of Parliament, legislative assemblies and gazetted officers from buying LPG at subsidized prices has been the move that the government has made recently.
New Tax regulations:
Finally the government has passed new Goods & service Tax and the Direct Tax Code bill. This will replace the 48 year old tax law in India. Though this reform has got implementation by date, the controversies followed seem to compress this before the next fiscal. Many states have already opposed to the GST.
If this reform can be implemented proper, there will be significant cut for the tax rates for individuals and companies and it can also attract many foreign investors. Since the present bill has got mixed responses we still have to wait and see this government promise’s practical application.
FDI in Aviation:
The government has already given proposals to reform the aviation sector but this has also been pending. The reform looks at 49 percent FDI investment in aviation sector. The present proposals for FDI seem to have ended again by the political reasons.
When Prime Minister Manmohan Singh, Finance Minister Pranab Mukherjee, Commerce Minister Anand Sharma and Aviation Minister Ajit Singh are in support of FDI the problems are within UPA itself. Mamata Banerjee-led Trinamool Congress is at the top in opposing the proposal. The reform will be very much helpful to domestic airlines to access funds easily. Presently five of six main operators in the aviation market are losing money due to high fuel costs, high taxes and fierce competition.