Indian state bankers strike against Modi’s reform plans

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Public sector bank workers across India are on strike to protest Narendra Modi’s plan to privatize two public lenders, jeopardizing his ambitious reform agenda.

The United Forum of Banking Unions, which represents nine unions, said up to 1 million employees and leaders would strike Monday and Tuesday to oppose “backward banking reforms.” Banking services are expected to be severely curtailed by the strike.

In his budget For the year starting in April, Modi’s government said it would privatize lenders as part of market reform ranging from the sale of state-owned enterprises to reform of agricultural and labor laws.

India urgently needs to increase revenue after the coronavirus pandemic dealt a severe blow to the rapidly growing economy. But reform plans are likely to meet further resistance as the government wage a fierce political battle over efforts to open up the agricultural sector to greater private participation.

“India reforms when it has its back to the wall, and right now it has its back to the wall,” said Shumita Deveshwar, economist at research firm TS Lombard.

She continued: “The intention for reform is there. Of course, there is a lot between intention and actual implementation. There has always been a big gap. But the fact that the government has a popular mandate, that Modi remains extremely popular and that the economy is in crisis, it is [the moment]. ”

The government is targeting a budget deficit of 9.5 percent of gross domestic product this fiscal year, ending this month, and 6.8 percent next year. He wants to raise 1.75 billion rupees ($ 24 billion) by selling his stakes in everything from aviation to shipping.

India’s banking sector is dominated by 12 public lenders who account for around two-thirds of assets, a lasting legacy of the country’s socialist past. It is not known which banks would be sold.

Many economists have said that reforming the system was vital the reorganization of a sector plagued by chronic bad debts, slow credit growth and governance failures.

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The share of bad debts should increase sharply, due to lockdowns linked to Covid. The Reserve Bank of India estimates that the ratio of non-performing assets will climb to 14.8% in September, from 7.5% in the same period last year.

However, some economists fear the authorities are going too far in opening up India’s financial sector to corporate influence.

A document from the RBI working group Last year has been criticized for proposing that conglomerates be allowed to own banks. Opponents argued that this would give tycoons undue influence over more and more sectors of the economy.

Raghuram Rajan, former RBI governor and professor at the University of Chicago, told the Press Trust of India this month that “it would be a colossal mistake to sell the banks to industrial companies”.


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