India set to speed up financial sector reforms

New Delhi: India's long-stalled reforms to its financial sector gained momentum on Sunday after Prime Minister Manmohan Singh said he would push through legislative changes, including the insurance sector which foreign players are eyeing.

Investors have been keenly awaiting signs of a pick-up in the pace of economic reforms in India after disappointment that the re-elected Congress party did not speed up the process after May's elections.

"We are also better placed than at any time in the recent past to push the reform process forward," he told the World Economic Forum in Delhi.

Singh also said his government would take steps in the 2010/2011 fiscal year to wind down economic stimulus measures for Asia's third largest economy.

"Some of the reforms needed, especially in insurance, involve legislative changes. We have taken initiatives in this area and will strive to build the political consensus needed for these legislative actions to be completed," Singh said.

He said India needed to develop long-term debt markets, deepen corporate bond markets, strengthen the insurance and pensions sectors, improve futures markets for better price discovery and regulation.

"All these issues will be addressed through gradual but steady progress in financial sector reforms to make the sector more competitive while ensuring an efficient regulatory and oversight system," Singh said.

He also said the government would accelerate the sale of stakes in state-run companies.

Reforms in Singh's first 2004-2009 government stalled due to pressure from his communist allies, now out of the ruling coalition after election defeats in May.

"The tone on reforms is very bullish and the government is well positioned to carry out these reforms because of the political mandate," D.K. Joshi, a senior economist at Indian ratings agency Crisil in Mumbai.

The government plans to introduce in parliament by December Bills proposing the raising of foreign stake limits in insurers to 49 per cent from the present 26 per cent and opening up the pension sector to private and foreign firms.

It will also propose a law to cut its holding in top lender State Bank of India to 51 per cent.

The prime minister said growth in the next fiscal year, assuming a normal monsoon season, was expected to be more than 7.0 per cent compared with a 6.5 per cent forecast for the 2009/2010 fiscal year.