On August 15, as India marked the 58th anniversary of its independence from British rule, the government gave the national economy a rude shock by calling off plans to sell a portion of its equity stake in 13 profitable public-sector companies.
The decision to scrap the sale came just 10 days after the ruling Congress party, under pressure from its left-leaning coalition partner, put on hold plans to sell stakes in engineering firm Bharat Heavy Electricals and in carmaker Maruti Udyog, a joint venture with Suzuki Motors.
Economists have decried the moves, claiming the turn away from privatisation threatens to derail economic reforms and hurt growth prospects in Asia's third-largest economy.
'This is not a positive development,' said James McCormack, sovereign rating analyst at Fitch Ratings. 'Whenever such a decision is taken, it reinforces our concerns about the state of public finances, which are already stretched.'
The cash-strapped government, which chronically runs a fiscal deficit of 4 per cent to 5 per cent of gross domestic product, had intended to fund anti-poverty projects through limited asset sales in public enterprises.
However, analysts said it was increasingly apparent that Prime Minister Manmohan Singh, who as finance minister was largely responsible for starting India's economic reforms 14 years ago, was fighting a losing battle.