India's reforms: Is the foreign investor still excited?

Global investors say the volatility in policy and the corruption scams of the last two years cannot be erased with two days of announcements.

India's big bang reform story has pushed the Sensex up all the way to 19000 plus. But is this reform going to drive capital towards India in the current economic scenario?

Senior journalist Shaili Chopra who is currently touring the US meeting CEOs and investors, writes that the effort to lure foreign investors may not get the euphoric response that government had originally hoped for.

"I have seen that movie before," says the CEO of one of America's biggest insurance firms within 24 hours of India's Cabinet allowing 49 per cent of foreign ownership in the insurance sector.

"Wait till it goes to the Parliament." That's the impression of India these days in big global markets. There is concern about whether policy is for real and if it is, will it really work. Some analysts go to the extent of asking if all the reform is coming too little too late. Others question that India is suddenly doing so much for the foreign investors but are they still interested?

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Over the last few weeks, India has 'opened up'. Quite a lot. With the Cabinet clearing foreign direct investment in insurance and allowing for amendments in the pension sector, reform as we know it, has a new roar.

India has allowed overseas firms to pick up to 49 per cent in local insurers and allowed investments in pension funds too. This however needs to be formalised through legislation, which can only happen now in the winter session of Parliament.

Opposition parties are not the only one interested in the fine print of all 'big bang reforms.' Global investors say the volatility in policy and the corruption scams of the last two years cannot be erased with two days of announcements.

Without wanting to sound cynical, this one India watcher said to me, "when the government does something in a hurry to rescue the mood, you know the story isn't sound enough."

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Although one can contest this saying such reforms in pension, insurance and retail have been long coming, there is a point all the same. Will band-aid economics give us a long term solution? Do these reforms really have the power to be the 1991 of the future?

Will economics indeed over rule politics two months from now when parties will be on the street seducing the voters for their thumbs?

A good question then is, can we define this as reform or foreign-investor friendly moves? And an even more important question is, is this reform being hailed by these very same foreign players?

Economist Bibek Debroy was quick to tweet that there has been a "Metamorphosis in jargon. Perform replaced by reform. Then reform replaced by FDI."

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If FDI is euphemism for reform then we need to know how it will change lives of the people. For reform is about people and improving the course of their business.

Undoubtedly, there was a big cry for India to open up but at the same time, there is concern that we are lifting the dam's barrage all together, leading to a flood the nation or foreign investors may not be ready for.

WalMart in India has made more headlines, than there is to the fine print. The international head of the firm has maintained the retail giant's interest but hasn't gone over the top about how India will be a killer app for them. Because it won't be.

WalMart's own expansion deceleration coupled with the detail in the retail FDI document will have it take a while before they can convert enthusiasm into real execution of stores on the ground.

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Carrefour, Tesco and many others who have been wanting to come to India still need partners. Having dealt with and negotiated deals with almost everyone in the sector (even before FDI in multi brand retail was cleared), global players will be stuck for choice.

Either the potential partners are those they have rejected or just don't want to do business with. Hard for me to believe that overnight these stores will erupt on street corners.

I think we all need to address the question - India is suddenly doing so much for the foreign investors but are they still interested?