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Friday, Sep 21, 2012 11:00 AM UTC

India government regains its muscle with reforms

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Topics: From the Wires,

NEW DELHI (AP) — Manmohan Singh’s coalition has splintered and his government is fighting for survival. But the Indian prime minister, who has been criticized for presiding meekly over a corrupt government, is suddenly being hailed as a bold, powerful leader.

Since pushing through a battery of unexpected economic reforms last week, and refusing to back down in the face of protests and political threats, Singh appeared to have rejuvenated a government thought hopelessly paralyzed.

“We have been faulted in the last few months of not being adequately a doing government. Now the time has come that we are doing something, and we hope that everybody who cares for this country and the new generation will join in,” Law Minister Salman Khurshid said Friday.

A day after a national strike by opponents of his economic program, Singh got a political breather Friday when a regional party opposed to the reforms said it would continue to support the government from outside the coalition. Singh prepared to address the country Friday night to explain his actions.

The turnaround for the soft spoken 79-year-old economist has been shocking.

“He made up his mind that he’s going to push through his economic reforms agenda, even if it means he was going to lose power,” said Dileep Padgaonkar, a veteran journalist and political analyst.

Padgaonkar said Singh was looking to rescue his legacy and reclaim the glow of his most famous achievement two decades ago when as finance minister he led wholesale reforms widely credited with sparking India’s economic rise.

In the past few years, his government was battered by scandals, including the irregular sales of cellphone spectrum and coal blocks that India’s auditor said cost the country billions. The opposition protested by paralyzing Parliament, making it impossible for the government to pass many bills. Bureaucrats, fearing they would get caught up in the next scandal, stopped making decisions, freezing business.

The Trinamool Congress, an important coalition partner, regularly blocked decisions. Its leader, Mamata Banerjee, torpedoed an about-to-be-signed water treaty with Bangladesh and fired the national railway minister, who was from her party, when he presented a budget including the first fare increases in nearly a decade.

A low point came last year when the government decided to allow foreign retail chains to come into the country — and then suspended the decision two weeks later after Banerjee protested.

Meanwhile, India’s economy, which officials had recently hoped would hit double-digit growth, was sputtering. The rupee had plunged in value and the country’s huge deficit was putting it under threat of a possible ratings downgrade.

Last week, Singh’s government responded. It cut the subsidy on diesel fuel by 5 rupees (10 cents) a liter and placed limits on cooking gas subsidies. It agreed to let in foreign retailers, loosened rules on foreign investment in airlines and TV and agreed to sell off stakes in four state owned companies.

The Indian Express newspaper said in an editorial the reforms were not likely to have much immediate impact, but “they are a crucial statement of intent.”

The moves sparked outrage from opponents who fear Indian jobs will be lost if large U.S. and European retailers enter the market.

“(Singh) is out to destroy the interests of small traders and farmers,” said Sitaram Yechuri, a lawmaker from the communist party.

Jai Prakash, a student at a protest rally in New Delhi, said the economic package showed “politicians are not bothered about the welfare of millions of poor people.”

Banerjee demanded an immediate rollback or she would pull out of the coalition. The government ignored the threat, setting the decisions into law Thursday.

Singh’s new reforms have been compared with his support for a U.S.-Indian nuclear deal that ended the country’s nuclear isolation but nearly brought down his government near the end of his first term in 2008.

That doesn’t look likely, at least for now. Though Singh will preside over a minority government without Trinamool, he maintains the support of two parties outside the coalition.

And it is likely that without the mercurial Banerjee the government might go further, possibly opening up the insurance sector to more outside investment and reducing sugar subsidies for the poor. At the same time, the government has sought to lighten the burden on the poor with a tax cut for cooking gas, and media reports said it planned to release 10 million tons of stored grain into the market to bring down food prices.

Zoya Hasan, a political analyst with New Delhi’s Jawarhalal Nehru University, said she might not agree with what Singh has done, but he has made himself into India’s most influential prime minister since its founding leader, Nehru.

“(He) has brought about a huge change,” she said.

___

Follow Ravi Nessman on Twitter at —www.twitter.com/ravinessman

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