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Indian government to press on with economic reforms, despite protests

Trade federations warn they will strike, the opposition wants fresh elections and a coalition ally is threatening to withdraw its support, but the Indian government has promised to push ahead with its economic reforms.

Bharatiya Janata Party activists protest against diesel and LPG price hikes in Calcutta. The Indian government has increased the diesel price by five Indian rupees per litre and restricted the number of cooking gas cylinders to six per family per year.
Bharatiya Janata Party activists protest against diesel and LPG price hikes in Calcutta. The Indian government has increased the diesel price by five Indian rupees per litre and restricted the number of cooking gas cylinders to six per family per year.

NEW DELHI // Trade federations warn they will strike, the opposition wants fresh elections and a coalition ally is threatening to withdraw its support, but the Indian government has promised to push ahead with its economic reforms.

The threats from friends and foes alike came in response to the United Progressive Alliance (UPA) coalition government, led by the Congress party, announcing a policy shift intended to accelerate India's slowing economy. Yesterday, the government underlined its intentions when the finance minster, P Chidambaram, said that Indians could expect "a number of additional policy measures" in addition to those announced last week.

But the UPA faces its first major challenge today as an ally, the Trinamool Congress, holds a meeting to decide if it wishes to continue in the coalition.

Mamata Banerjee, the leader of the Trinamool Congress, lashed out at these reforms as "anti-people" and said that her party would need to take "hard decisions" during its meeting.

The reforms include liberalised foreign investment norms in India's retail, aviation and broadcasting sectors, a rise in the price of diesel, a cap on the number of subsidised cooking-gas cylinders, and a sale of the government's stakes in four public-sector companies.

Opposition to the reforms consists largely of the arguments that fuel price hikes hurt the middle class and that allowing retail giants such as Walmart into India would be the ruin of small retailers.

Although Ms Banerjee did not offer further hints of her course of action, media reports have suggested that she might recall her party's federal ministers in protest but continue to provide the UPA the support it needs to retain a parliamentary majority.

At present, the UPA holds 311 seats out of 545 in the Lok Sabha, the lower house of parliament. It needs a minimum of 273, so even a full withdrawal of the Trinamool Congress's 19 seats would leave the UPA with a comfortable margin.

Buddhadeb Ghosh, a senior fellow at the Institute of Social Sciences in Kolkata, told The National that he doubts very much "whether Mamata Banerjee will withdraw support or withdraw her ministers".

"If she does, there may be some kind of revolt within the party".

Ms Banerjee had, Mr Ghosh said, "a history of taking all the advantages of being in government but telling the people that she isn't a party to such decisions".

Other UPA allies have made more indistinct noises about their resistance to these reforms.

The leader of the Bahujan Samaj Party, Mayawati, criticised the reforms, saying that they would "severely affect the country's poor … and the middle class". But she said that her party would decide on its support of the government next month, when it holds a large rally in Lucknow.

The Congress' main opposition, the Bharatiya Janata Party (BJP), has called a country-wide strike on Thursday.

At a news conference on Sunday, the BJP leader LK Advani urged the government to resign and called for fresh elections, so that "the people [can] give their opinion about the UPA government … Let the people make a decision".

The Communist Party of India (Marxist) has labelled the reforms a "gigantic fraud" and has called, also on Thursday, for a 12-hour strike in West Bengal.

The Confederation of All India Traders (CAIT), an umbrella body of nearly 10,000 trade federations, said it would mobilise on Thursday because it feared the reforms would "wipe out" small traders.

The UPA, for its part, appears determined to stand firm, although Congress sources have indicated that the hike in the price of diesel might be somewhat softened.

"There could be a period of turbulence but we are confident of a safe landing," an unnamed Congress source told Reuters. "We can live without Mamata."

Through Sunday, the prime minister's office, using the hashtag ReformToReality, posted several tweets from its official Twitter account about how reforms have helped, rather than hurt, the common man.

"More than 60 million households got new electricity connections just in a decade," said one tweet.

While Mr Chidambaram did not give any details on the additional measures, he said he hoped that they would encourage India's central bank to cut interest rates next month. The Mumbai-based Reserve Bank of India (RBI) left rates unchanged at a meeting on yesterday, saying it was still concerned about high inflation. "I am very confident that between now and October 30, since the government is expected to take a number of additional policy measures and also lay out a path of fiscal correction, the response of the RBI will be far more supportive of growth," Mr Chidambaram said.

 

ssubramanian@thenational.ae

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