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Coalition course to shape reforms

New Delhi, May 14: The nation’s economic agenda in the coming days will be determined by the shape of the next coalition government, analysts said.

Parleys for such a coalition have already started, and businessmen backing particular groupings are believed to be active behind the stage.

If the Congress-led alliance comes to power, expect limited disinvestment in PSUs, liberal labour policies and easier entry rules for foreign equity — including in contentious areas such as pension and insurance. Besides, there will be populist measures such as cheap grain for the poor and the extension of the rural employment guarantee scheme to urban areas.

Alliance partners, however, may force the Congress to dilute its agenda. If the Samajwadi Party comes on board, for instance, it can seek changes in the telecom policy. Nevertheless, the analysts said, such a coalition would be the most supportive of reforms.

“We will continue with our stand on telecom policy. But we want economic reforms to continue with a people-oriented approach,” said Mohan Singh of the Samajwadi Party.

Yesterday, business tycoon Anil Ambani met both his friend and Samajwadi Party leader Amar Singh as well as Prime Minister Manmohan Singh separately in New Delhi. Speculation was rife that the meetings were designed to bring the two parties together. Anil’s elder brother Mukesh was also in Delhi yesterday.

Many believe the Congress can’t come to power without the support of the Left, which means a dilution of its reformist agenda. It will have to put on the backburner plans to open up retail and the financial sector to foreigners, and limit the size of disinvestment.

Investment banker Goldman Sachs has said that if a Congress-led government is formed with Left support, the policy regime would remain as before with little changes.

“What kind of a government will be formed will depend on who gets what numbers. But we feel that the Left parties and their allies will play a crucial role in determining things and if it does, it will hold internal discussions on its agenda,” said Nilotpal Basu, former MP and CPM central committee member.

If the third front comes to power, there could be a spate of populist spending programmes, but little of reforms. Possibly, there will be higher inflation as the spending will lead to a larger gap between the government’s income and expenditure.

A BJP–led government could also initiate more reforms, such as the opening up of the financial sector and disinvestment.

However, the party’s spiritual guide, the RSS, has in the past played a spoilsport to reforms.

Though the BJP has promised lower taxes and cheaper grain in its manifesto, a government headed by the party could strive for better infrastructure, increased exports and privatisation, according to Goldman Sachs.

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