India sticks with reform
India's Congress-led coalition government has forged agreements with leftist allies to maintain economic liberalization and reforms initiated by the previous administration. But the left has forced it to limit new openings for foreign investment and queried some privatization strategies.
THE RESOUNDING SUCCESS of the first sale of government shares under India's new United Progressive Alliance government last month provided a welcome boost to the coalition's confidence in its ability to deal with international financial markets.
The $1.2 billion dollar initial public offering by National Thermal Power, India's largest power producer, was oversubscribed more than 12 times and shares priced at the top end of the indicated range on October 14. Half of the shares on offer were from the government's stake. The portion of the offering reserved for institutional investors was oversubscribed 16 times and reportedly included bids by Citigroup, HSBC, Fidelity, Templeton, Merrill Lynch, Janus and Morgan Stanley.
India's new coalition, led by the Congress party, might have a new dynamic – because it leans on parties of the left for support, unlike the previous government, which relied on the right – but it has familiar faces that investors find reassuring.
"This government has the best economic thinkers in the country and they know what needs to be done," says Sanjay Nayar, CEO, Citigroup India, which has invested $1 billion in capital in the country.