Turmoil may force India to go slow on reforms

New Delhi: India will adopt a more cautious approach towards fuller rupee convertibility and banking reforms due to the global market crisis, slowing already tentative steps to open its financial sector, a government official said.

Indian policymakers have said the financial turmoil would only have a marginal impact on India's economy, but the worst crisis since the Great Depression has taken a toll on local stocks as investors cut exposure to riskier assets.

Analysts say the market turmoil may force Asian countries to go slow on deregulation, rush to the rescue of troubled companies or clampdown more quickly on market volatility.

"There is a roadmap, but given what has happened there will some pause," a senior finance ministry official, who asked not to be named, told reporters on Wednesday when asked about expanding the rupee's capital account convertibility. "We can't move at a fast pace."

A panel appointed by the central bank has suggested a three-phase blueprint for fuller convertibility by the end of 2010/11 fiscal year.

Analysts said the government was justified in its cautious approach but should not postpone reforms indefinitely.