Foreign institutional investors need not fear India's Prime Minister P.V. Narasimha Rao will slam the brakes on the country's economic reform program because of his party's losses in two key southern states in early December's state elections.
The reforms, begun in mid-1991, have "broad support," said Jaskaran S. Teja, director of The Pioneer Group Inc., Boston, which runs several mutual funds invested in Indian securities.
"The reason for these changes is that they are rational and beneficial for the economy, not for winning votes," he said.
India's economy has taken off under Mr. Rao's liberalization program, which has opened up the Indian capital markets to foreign investors, slashed corporate and individual tax rates, eliminated or reduced import tariffs and boosted exports.
In fact, Mr. Teja expects Mr. Rao's administration will present an "investor-friendly" national budget for the fiscal year starting April 1.
Mr. Teja anticipates the budget will include a streamlining of the tax system, and possible cuts in short-term capital gains taxes on investors.
But Mr. Teja said Mr. Rao's government might not be as quick to eliminate agricultural or other subsidies for fear of alienating voters.
