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‘Big-bang’ reforms unlikely: Goldman

NEW DELHI: Financial services firm Goldman Sachs on Tuesday said the UPA government was unlikely to pursue ‘big-bang’ reforms, but piecemeal changes in policies might take place, including hiking of foreign direct investment (FDI) cap in insurance and disinvestment in public sector units.

“...structural reforms will be of a piecemeal nature and happen gradually, without being ‘big-bang’ or radical in nature,” Goldman Sachs said in a report.

The financial services firm said there was less likelihood of further opening up of the banking sector to foreign banks, FDI in retail, changes to labour laws, outright privatisation and any major subsidy or expenditure reduction.

“The low likelihood of allowing more entry to foreign banks will shield the domestic banking sector from greater competition,” the report said.

However, it added that insurance reforms were also likely to take place with an increase in the FDI to 49 per cent from 26 per cent in the sector and a big push in disinvestment to finance the fiscal deficit in the short-term was likely to take place.

Goldman Sachs said there was high possibility of stake sale by the Government in public sector units especially to retail investors, while retaining its holding above 51 per cent.

“The disinvestment will garner funds for financing the fiscal deficit, including foreign funds; reduce government market borrowings and lower bond yields,” it said.

Goldman Sachs also said the government was likely to pursue pension reforms by setting up an independent regulator. This, along with, insurance reforms will channelise domestic savings for long-term investment.

The financial services firm also said that there was a possibility of removal of regulatory hurdles for investment in roads and ports, implementation of the Goods and Services Tax from April 1, 2010.

Also, opening up of mining to greater exploitation, higher education reforms and changes to boost governance and efficiency in bureaucracy to some extent may be ushered in by the new government. — PTI

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