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India government fails to end parliamentary deadlock
Reuters - November 30, 2010
Abhijit Neogy, New Delhi – India's government and opposition parties failed on Tuesday to break a three-week parliamentary deadlock over a corruption probe that has weakened the ruling Congress-party and stalled spending and reform bills.
New Delhi may have lost up to $39 billion by selling cellular licenses too cheaply, and the new telecoms minister has vowed action against holders of 85 licenses that may not have met eligibility criteria and others that have failed to meet rollout requirements.
It was the latest in a string of scandals that has emboldened opposition to Prime Minister Manmohan Singh's government and weakened his ability to govern Asia's third largest economy.
"The stalemate continues," the leader of the opposition, Sushma Swaraj, said after the meeting at which she demanded the government accept a joint parliamentary enquiry into the case.
Parliament was supposed to discuss a bill for additional spending of about $9.8 billion to ensure the functioning of government, including interest payments on government debt and subsidies on food and fuel.
The government must pass the bill before the end of the parliamentary session on December 13 or the government falls. But the government could force through the bill despite opposition if the decision came down to the wire.
Other stalled bills included legislation to ease land acquisition for industry and mines, one of the country's biggest roadblocks to improve ailing infrastructure.
While the government will likely survive and the market impact has largely been limited to specific sectors, Congress is mindful it lost a 1989 general election partly due to a bribes scandal over gun contracts that hit then-Prime Minister Rajiv Gandhi's image.
Corruption is nothing new in emerging markets such as China and India, but the stakes in India have risen as the economy modernizes and investment surges but the political system remains heavily reliant on patronage and graft is rife.
Shares in property firm Unitech, which has a cellular joint venture with Norway's Telenor, and Videocon, which was among the telecom license holders named in a government audit, fell more than 6 percent in early trade.
Unitech and Videocon stocks rebounded later and closed up 4 percent and 1.95 percent, respectively, on bargain hunting, traders said. The main index gained 0.6 percent on strong economic data.
On Tuesday, the finance minister told investors not to panic over a bribes-for-loan case that led to eight executives being arrested in the latest graft scandal to surface this month.
The Central Bureau of Investigation (CBI) arrested eight financial executives from the public and private sector last week, including three from brokerage Money Matters Financial Services.
"There is no need for pressing the panic button. All the loans which have given to the various concerns – they are well protected, money of the investors in these institutions," Finance Minister Pranab Mukherjee told reporters.
The Indian economy, growing at 8.5 percent, has been beset by other scandals in the past few months, among them accusations of government mismanagement in India's hosting of the $6 billion Commonwealth Games.
The CBI, which is investigating corruption scams linked to the Games, on Tuesday raided the home of its organizing secretary and Games committee offices in relation to a probe into $21.7 million of misplaced funds.
Despite the scandals, India remains a favored investment destination, especially for businesses hit by weak US and European economies.
"India is an extraordinary market opportunity," Ron Somers, head of the US-India Business Council, told Reuters Insider TV. "It's not a place to do business for the faint-hearted. This is a long-term commitment."
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