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India's Reform Gains Credibility

The government finally makes moves to recharge the economy
Finance Minister Palaniappan Chidambaram
Finance Minister Palaniappan ChidambaramPhotograph by Prakesh Singh/Getty Images

Pitching India is no longer a chore for Rajiv Anand, the chief executive of Axis Asset Management, a Mumbai-based money manager that oversees $1.9 billion. Until recently, Anand struggled to persuade would-be investors turned off by corruption scandals, political paralysis, and the slowing economy to give India a chance. A series of power failures in July that plunged hundreds of millions of Indians into darkness didn’t help. Nor did warnings of impending downgrades to the country’s credit rating, which stands just one notch above junk. “Trying to sell the India story just didn’t resonate,” Anand says. “Nobody wanted to hear it.”

Then, starting in September, Prime Minister Manmohan Singh and his new team of economic advisers led by Finance Minister Palaniappan Chidambaram unveiled proposals to ease restrictions that bar foreign companies from operating freely in broadcasting, insurance, and other industries. To burnish the government’s reformist credentials, Singh reshuffled his cabinet at the end of October, replacing about a third of his ministers. The moves have lifted the spirits of investors who have watched Asia’s third-largest economy sputter. Growth was 5.5 percent in the second quarter, down from 8 percent in the same quarter last year. “We’ve regained some of that credibility,” says Anand.