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India markets ripe for privatisation

HYDERABAD(ndia): The Indian government should take advantage of bullish domestic stock markets and speed up the privatisation of state-run companies, the chairman of JM Morgan Stanley said.

"I feel that the government would consider very strongly the privatisation programme after the budget and they will improve that substantially," Nimesh Kampani, who heads the joint venture between Morgan Stanley and JM Financial and Consultancy Services, told Reuters in an interview on Saturday.

The government is due to present the federal budget in the lower house of parliament on February 29.

"I think there is going to be an opportunity as the markets are good," he said in the southern Indian city of Hyderabad, where he attended a conference on banking sector reforms.

The investment banker said the government's intent to privatise was clear. India's four-month-old Bharatiya Janata Party-led government has passed a slew of reformist legislation in recent months.

The state-controlled insurance sector has been opened to foreign investors, derivatives trading has been permitted, and strict foreign exchange control laws have been relaxed in an effort to boost foreign investment inflows.

Last month, Finance Minister Yashwant Sinha said India may miss its target of raising 100 billion rupees in 1999/2000 (April-March) through its sale of government stakes in state-run firms.

"The government has a fiscal deficit and it needs funds.The markets are willing to pay, so I think this is a great opportunity for the government to move fast and I think this government will move fast," Kampani said.

Indian stock markets are trading slightly below record highs hit in January. In calendar 1999, the Bombay Stock Exchange's bellwether 30-share index surged 64 percent and hit an all-time high of 5,668.28 in January this year.

Kampani said he was hopeful Sinha will give a further boost to the markets, after the investor-friendly measures taken last year, particularly incentives given to mutual funds.

"I think that the Finance Minister will do something innovative. He will take care of the markets, as I see it," Kampani said.

A rising fiscal deficit and shortfall in government revenues have led to some fears Sinha will raise taxes and cut spending, but Kampani believed the taxation fears might be overblown.

Indian Finance Yashwant Sinha said last Friday there were no soft options left for the government.

"There may be some tough measures in the budget. It could be reducing government expenditure," Kampani said.

"Tough does not necessarily mean higher taxes. I don't see much problems in the budget," he said. -Reuters