Foreign carriers have now been allowed to invest up to 49 per cent in India’s airline companies. It has been a decision that was awaited since long. The move had been strongly opposed, particularly by Jet Airways, in the past.
The government is also looking to raise Rs 12,000 crore (approximately $2.2 billion) by selling its stake in four companies – National Aluminium, MMTC, Hindustan Copper and Oil India. The plan to disinvest stake in Neyveli Lignite has been put off for now.
“The decision of FDI in multi-brand retail does not need Parliament’s approval,” Montek Singh Ahluwalia, Deputy Chairman of Planning Commission, said.
These decisions come a day after the price of diesel was raised by Rs 5 per litre. The decision to raise diesel prices has been taken after intense debate within the government on the impact it could have on inflation.
The UPA government’s top policy makers are patting themselves on the back for the slew of policy changes that have been approved by the Cabinet. The move is being positioned as the end of the policy paralysis.
But has the government really moved ahead with policy? It would appear that the government has chosen the easy route to dismiss the charges of policy paralysis.
The government’s move has come only for those issues which do not need the approval of Parliament. By making an announcement, and positioning it as big bang, the UPA is looking to steal the Opposition’s thunder.
The timing of the government's move also comes just ahead of the ratings review that is expected in October. The ratings agencies have warned the government for its failure to cut down on wasteful expenditure.
Banking, pension and insurance Bills, besides the constitutional amendment Bill for goods and service tax (GST) are still stuck. These are key economic legislations that Indian industry is looking forward to.
Banking amendment Bill is with Parliament while the Cabinet notes on FDI in insurance and pension are yet to even reach the Cabinet. The Standing Committee on Finance is still to submit its report on the constitutional amendment bill needed before the implementation of the key tax reform.
The report of Parthasarathi Shome panel on the retrospective tax changes, as envisaged in the Finance Bill 2012, is expected after September 15. Depending on the report, the government will have to go back to Parliament to make suitable amendments.
While the policy push may have grabbed headlines, the government will need to have its ear to the ground. It will have to keep reviewing its goalpost as the impact of the Q3 liquidity will be felt around the globe. That could inflate commodity prices, which could derail government finances yet again. Shielding the common man from the QE3 impact could be the biggest challenge with less than two years to go for the 2014 general elections.