Key ally quits Indian government amid uproar over reforms

21 September 2012 12:27 pm - 0 - {{hitsCtrl.values.hits}}

A A A

The biggest partner in Indian Prime Minister Manmohan Singh's shaky coalition formally withdrew on Friday over big-ticket economic reforms that have cheered investors but sparked nationwide protests.

The Trinamool Congress pulled out its six ministers and 19 MPs, reducing Singh's coalition to a minority government and bringing even more instability to an already volatile political landscape. While there appears to be no immediate risk of the government falling, Singh will struggle to push forward with his economic reform agenda and get legislation through parliament.

His coalition will now have to rely on the outside support of two powerful regional parties that have their own political agendas and are equally hostile to reforms such as allowing foreign supermarkets to set up shop in the country.

"Barring a political perfect storm, we now believe that the current government is likely to limp along through the scheduled end of its five-year term in mid-2014," said David Sloan, an analyst at political risk research consultant Eurasia.

The prime minister is due to make an unusual televised address to the nation at 8 p.m. (1430 GMT) to try to tame the popular outrage. Many parts of India were brought to a halt on Thursday by a nationwide strike called to protest the reforms.

PRESSING ON WITH REFORM

Despite the backlash, the government pressed ahead with more reforms on Friday, slashing a tax on overseas borrowing by Indian firms and implementing a scheme to encourage individuals to invest in the stock market.

The cabinet may also approve measures next week to allow greater foreign investment in the insurance sector.

Indian stock indexes rose more than 2 percent on Friday to their highest since July 2011 on hopes of further reforms.

"It's all very positive. Actually, the way the market has endorsed it, that itself is a good testimony of whatever the government has done after a long period of market-perceived inactivity," said Sunil Agarwal, head of the institutional client group at Deutsche Bank India.

Singh has faced withering criticism from Indian business leaders, economists and foreign investors for inaction as economic growth slumped to 5.5 percent. Now that he has taken action, he finds himself under fire from coalition allies and political opponents keen to find political advantage ahead of state polls later this year and national elections in 2014.

Trinamool Congress leader Mamata Banerjee, the firebrand leader of West Bengal state, had threatened on Wednesday to pull her ministers out of the coalition if the reforms were not rolled back by Friday. The government rebuffed the threat and formally approved the retail reform on Thursday.

The cabinet could approve a proposal to ease restrictions on foreign investment in the insurance sector, raising the cap to 49 percent from 26 percent, a Finance Ministry official said on condition of anonymity. It still needs to clear parliament, however, and that is not seen likely in the foreseeable future.

(Additional reporting by Satarupa Bhattacharjya and Manoj Kumar, editing by Ross Colvin)

(Source : Reuters)

Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka

Comments - 0

Add comment
Comments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.

Key ally quits Indian government amid uproar over reforms

Comments - 0

Add comment

RECOMMENDED

UDA owned land in Thalawathugoda; UDA Minister Prasanna Ranatunga under the spotlight for forceful occupation of reserved land

Loss-making SMIB faces political pressure in recovering loans

Baltimore Bridge Collapse: MV Dali, SL authorities anchored in mystery?

Has Sri Lanka become a potential hub for the illegal wildlife trade?

Spotlight on Moragahakanda Development Project Moragolla villagers lose livelihoods and down to one meal a day

Ambitious Sri Lankan jobseekers ‘trafficked into Ukraine war zones’

Western purple-faced langurs see blue!

Most Viewed in News

April 15 declared a government holiday

A US “Kaputa”, a Lankan “Nariya” and a Presidential “Feast”

23 year old youth ends up having his testicles removed

Former MP Palitha Thewarapperuma dies from electrocution

New Visa procedure implemented

Suspicious death of 23-year-old woman at hotel sparks concerns

MIRROR CRICKET

How does CSK get best out of Pathirana?

Mendis, Mathews move up in ICC Test Rankings

Chamodi, Dewmi spins Sri Lanka U19 Women to big win

Amir, Wasim return to Pakistan national team

TODAY'S HEADLINES

100 Police personnel trained to target criminals operating on motorbikes

Catholic Church receives full report

Complaint lodged over Piumi Hansamali’s possession of Gota’s Range Rover

We are struggling with severe shortage of staff – Excise Chief

Mendis, Mathews move up in ICC Test Rankings

Security raised for Champions League ties after threat

SLA target four events at Paris Olympic Games

Chamodi, Dewmi spins Sri Lanka U19 Women to big win