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Indian PM's biggest ally quits coalition over controversial reform plans

The biggest ally in the Indian prime minister's government yesterday withdrew its support over objections to big-ticket reforms announced by the Congress Party to boost India's flagging economy.

NEW DELHI // The biggest ally in the Indian prime minister's government yesterday withdrew its support over objections to big-ticket reforms announced by the Congress Party to boost India's flagging economy.

Mamata Banerjee announced last night that her party, the Trinamool Congress, would no longer stay in the United Progressive Alliance (UPA) coalition government.

The fallout considerably weakens the coalition, led by premier Manmohan Singh, but the Congress can look to other regional parties for support.

"We waited enough time," Ms Banerjee said after a meeting of her party in Kolkata.

Reforms announced on Thursday and Friday include liberalised foreign investment in India's retail, aviation and broadcasting sectors.

The government also unveiled a 12 per cent rise in the price of diesel - equal to about five rupees (30 fils) a litre - along with a cap on the number of subsidised cooking-gas cylinders available for families.

Ms Banerjee lashed out at the reforms, saying that her party was "not in favour of withdrawing support earlier, but we saw that the UPA never discussed anything with us".

She had threatened "hard decisions" to force the Congress-led coalition government to reconsider its move and, last week, set a 72-hour deadline to roll back the decisions on the reform announcements.

"They are showing us international markets," said Ms Banerjee. "But where will these poor people go?"

She was referring to small retailers and family-owned corner stores, which she would be hit hardest by the rise in fuel costs, and muscled out by the decision to allow foreign retailers - such as large Walmart stores - into the country.

Ms Banerjee said Trinamool ministers would resign from cabinet on Friday. Those bowing out will include Mukul Roy, the minister for railways.

The UPA holds 311 seats out of 545 in the Lok Sabha, the lower house of parliament. It needs a minimum of 273 seats, and relied on the Trinamool Congress's 19 seats to maintain a majority in parliament.

Ms Banerjee's move has exposed the government to the threat of midterm elections, which are set for 2014.

India's finance minister, P Chidambaram, yesterday ruled out any decisions to roll back the reforms, which the government sees as crucial to reining in a bloated fiscal deficit and improving investor sentiment.

"We are making policies, what are doable and what are implementable. We make policies which have broad acceptance," Mr Chidambaram said in New Delhi yesterday.

"We see that this is ultimately what government can do."

Meanwhile, thousands of private buses remained off the streets of West Bengal yesterday in protest against the increase in the price of diesel.


* Additional reporting by Reuters

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