No major economic reforms are likely in India before the scheduled 2014 general elections, the top economic adviser said today, despite widespread political disarray.
Investors have been waiting for the Congress-led government to unleash a raft of changes to reduce the economic role of the state, ease business regulations and open doors to more foreign investment.
But the pro-market reform drive wave has fallen apart as the ruling coalition's recent liberalisation attempts have been hindered by the opposition as well as political allies.
"We are going through a difficult year," India's government's chief economic adviser Kaushik Basu told the Carnegie Endowment for International Peace, a think-tank in Washington, Indian media reports said.
A string of corruption scandals, stubbornly high inflation and a slowing economy have weakened the government and a gridlocked parliament, with major economic reforms stalling.
The unearthing of the corruption scandals, such as the massive 2G spectrum scandal, has had an impact on the psyche of India's bureaucracy which is now unwilling to take risks, Basu said.
There is a slowdown in decision-making, making the introduction of new reforms 'unlikely' before the next parliamentary elections in 2014, he added.But after the general elections, India could witness 'a rush of important reforms' if the new government wins a majority, Basu said.
India's delays in land acquisition for major industrial projects, red tape, infrastructure bottlenecks and government policy flip-flops have dismayed foreign investors.The government was in December forced into a U-turn over plans to open the nation's huge retail sector to global competition, deepening the impression of a government in drift.