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India plans to remove some restrictions on its state-owned companies, including allowing them to borrow and invest without seeking the permission of the government, according to people with knowledge of the matter.
Prime Minister Narendra Modi wants to make it easier for these firms to diversify into new markets and boost manufacturing, thereby helping him create jobs and lower imports, the people said, asking not to be identified before a formal announcement. The proposal may be announced as early as Tuesday, when India presents its annual budget.
A spokesperson for the Finance Ministry didn’t respond to a request seeking comment.
The expected overhaul will add to corporate governance reforms enacted by Modi’s administration, which have led to increased dividend payouts by state-run firms and helped deliver six straight quarters of better-than-estimated earnings. After attempts to sell stakes in these companies yielded little success, the government has sought to focus inward and weed out practices that have hindered competitiveness.
Some of the changes proposed include:
- Reduce size of board of directors to help reduce costs
- Create more classification categories: ‘maharatna’, ‘navratna’, ‘miniratna’, profit-making and others
- Mandatory listing of shares for all categories as against current mandate for companies under ‘maharatna’ category
- As much as 25% lateral recruitment across all categories
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