Bloomberg News

India’s Singh, Congress Party Unite Behind Economy Overhaul Plan

November 04, 2012

Indian Prime Minister Manmohan Singh

Manmohan Singh, India's prime minister. Photographer: Pankaj Nangia/Bloomberg

Indian Prime Minister Manmohan Singh and the Congress party’s top leadership used a mass rally in the capital to unite behind steps to further open the economy to foreign investment ahead of a crucial parliamentary session.

“We have to embrace change,” Singh told the open-air gathering of tens of thousands of supporters in central New Delhi yesterday that was opened by Rahul Gandhi, scion of India’s leading political dynasty, bolstering political analysts’ expectations he may soon take control of the party. “We have to leave the easy route and choose the difficult one because this is needed for the country’s future,” Singh said.

After two years during which his legislative agenda was paralyzed by corruption allegations and infighting within the governing alliance, Singh in mid-September began unveiling what amounts to the biggest policy push in a decade to overhaul an economy growing at near its slowest pace in three years.

It included moves to allow foreign investment in multibrand retail outlets, the pensions and insurance industries, aviation, broadcasting and power exchanges, and a decision to raise diesel prices to stem a fiscal deficit.

To bolster the government before parliamentary debates over the proposals, Singh on Oct. 28 replaced about a third of his ministers, drafting in younger lawmakers as he aimed to repair the reputation of his administration.

On Offensive

“Congress has clearly moved to an offensive position from a largely defensive one,” said N. Bhaskara Rao, chairman of the New Delhi-based Centre for Media Studies yesterday. “It was also clear the party wanted to project Rahul Gandhi as the man who’s meant for bigger things in the party.”

Opposition parties are threatening a no-confidence vote when parliament meets for the winter session scheduled to begin on Nov. 22. Two smaller regional parties have already quit the coalition in protest over the foreign investment moves, leaving Singh reliant on the support of unpredictable regional powerbrokers 18 months before a general election.

Gandhi criticized the main opposition Bharatiya Janata Party, saying the group had nothing constructive to offer. Economic reforms were needed to help the poor, Gandhi told the rally that was also addressed by his mother, Congress President Sonia Gandhi.

Singh, 80, said his policy initiatives, including plans to lower the country’s bill for subsidized foods and fuel, would help stabilize the economy and provide the jobs India needs. He discounted fears the arrival of overseas retailers like Wal-Mart Stores Inc. (WMT:US) would force small shop-owners out of business and damage the livelihoods of farmers.

‘Bugle Sounded’

India, Asia’s third-largest economy, expanded 5.5 percent in the three months through June from a year earlier, close to the 5.3 percent pace of the previous quarter that was a three- year low. The central bank cut lenders’ reserve requirements on Oct. 30 in a move that supports the government’s policy revamp.

In an electoral test for Singh and his party, voters yesterday went to the polls in the northwestern state of Himachal Pradesh, where the BJP is in power.

“The bugle has been sounded, and the Congress party seems to have signaled its preparation for the next parliamentary elections,” said Rao by phone. “The show of confidence has to be maintained now, because the BJP will react.”

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net


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