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New Delhi: Having lost the shackles of its communist allies that stymied years of economic reforms, India's government finally has political space to push for change.
But Prime Minister Manmohan Singh, with his new pro-business partners the Samajwadi Party (SP), is unlikely to barrel through with major economic changes despite a laundry list of reforms and focus instead on surging inflation ahead of key polls in 2009.
"I don't think any big bang reforms will happen. Right now the key macroeconomic challenge is inflation and they will concentrate all their energy in bringing it down," said D.K. Joshi, principal economist at ratings agency Crisil in Mumbai.
Free market
Prime Minister Singh, one of the architects of India's free market reforms, secured the support of the SP to replace his communist allies who say they will withdraw from backing the government if it presses ahead with a civilian nuclear deal with the United States.
The SP's support should help the government avoid early polls this year and allow it to concentrate on fighting inflation which is at a 13-year high, as well as rising interest rates and signs of economic slowdown.
Shubhada Rao, chief economist at Yes Bank in Mumbai said where reforms were concerned there could be some easing of foreign direct investment rules.
But little else is expected given the short period ahead of the general elections. Singh's government stalled on reforms over the last four years due to staunch opposition from its communist allies.
In the SP, led by the wily Mulayam Singh Yadav, Singh has a partner which will be far more pragmatic about its dealings with the government - and just as willing to push for populist, vote-winning measures as elections approach.
"Mulayam Singh Yadav is a hard-boiled politician who has come up on the strength of his hard work and practical approach," wrote Pankaj Vohra in The Hindustan Times. "He is not a theoretician-politician like some of the Left leaders are."
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