The Bharatiya Janata Party on Thursday asked the United Progressive Alliance government to reconsider financial sector reforms in view of the collapse of banking and financial institutions in the US.
"The US crisis should make the government rethink on its proposed road map, to be implemented from March 2009, which envisages conferring voting rights on foreign investors in Indian banks," BJP spokesperson Ravi Shankar Prasad said.
This is a clear indication that the BJP will not support the government on the Banking Regulation Bill, which moots lifting the 10 per cent voting-right cap on investors, both domestic and foreign, in private banks. It is pending in Parliament and the government has indicated it will like to press ahead with it.
The Bill cannot be passed without the support of either the BJP-led National Democratic Alliance or the Left parties, which are vehemently opposed to it.
Asking the government to insulate the economy from the fallout of the US crisis, Prasad said manufacturing in India was already showing signs of distress.
He said with the UPA government's only tool against inflation being hikes in interest rates, Indian manufacturers had started feeling the heat.
He said with the US crisis' fallout on the world's major investment institutions, funds for manufacturers had become difficult to come by. In case the government did not act fast, the export sector, the largest employer, would be severely hit, he added.
Accusing the government of 'mismanaging the economy,' Prasad said even before the US crisis had reached its peak, foreign financial institutions had started withdrawing money from India.
He claimed that $8 billion had already been withdrawn from the Indian stock market this year.
Asking the government to learn from the US crisis, Prasad said it needed to tread cautiously on reforms.
"Unless the fundamental structures of the economy are duly supported by sound financial policies, artificial attempts to boost the economy by doses of cheap money can never help in the long run,'' he said.
The BJP also asked Prime Minister Manmohan Singh to raise the issue of hundreds of Indian professionals who were likely to lose jobs across America, Europe and the UK.