Tuesday, August 16, 2005

India cancels privatisation plans

by Brian Turner

The government of India announced on Tuesday that it has cancelled plans to sell more than a dozen state-owned companies. The plans to sell shares in the 13 companies had been made by the previous government, but were opposed by the leftist allies of the currently ruling Congress Party.

The nation’s finance minister told parliament that the government was abandoning the plan in fulfillment of promises it had made to those parties, which had aided in the Congress Party’s election victory last year.

The leftist parties, which believe that layoffs would follow privatization, had threatened nationwide strikes if the government went through with the privatization plan. After independence, India owned and ran a large number of countries in accordance with a philosophy of self-sufficiency, but had begun privatizing some of those companies and retaining control only in firms such as those dealing in energy, in which governmental participation was seen as crucial.

Still, the Indian government is left with around 200 companies in a wide range of sectors. Analysts expect that the policy reversal will slow down economic reforms and have an effect on the flow of foreign investments into the country. The Indian government also dropped, at the request of the leftists, an amendment to a banking bill that would have reduced the government-owned share of state-owned banks from 51 percent to 33 percent.

 

 

 

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