Indian Prime Minister Manmohan Singh yesterday defended a string of economic reforms unveiled by his government, despite protests over higher fuel prices and new foreign investment rules.
Singh, speaking to ministers and advisers in New Delhi, said the reforms were needed to revive flagging economic growth, improve the investment climate and boost public finances.
“The recent increase in diesel prices is an important step in the right direction,” he said, following a decision on Thursday to hike the heavily subsidized price of the fuel by 12 percent.
Truckers unions have since threatened to go on strike and there were protests on Friday over the halving of the number of subsidized cooking gas cylinders available to households per year.
On Friday, the Cabinet also cleared highly contentious new rules inviting foreign supermarkets into the Indian retail sector and allowing foreign airlines to take stakes in domestic carriers.
“To achieve the target of 8.2 percent growth [contained in a new five-year economic plan], we need to revive investment in the economy. The investment environment is therefore critical,” Singh said.
India was dependent on inflows of foreign capital because of imbalances in its spending and consumption patterns, the under-fire 79-year-old said.
The Trinamool Congress party, a regional partner in Singh’s multi-party coalition, said it was to hold a street rally in its power base of West Bengal yesterday to demand a roll-back of the changes.
“We will take to the streets … to protest the hike in diesel prices as well as the government’s decision to ration liquefied petroleum gas,” Trinamool party secretary Mukul Roy, who is also India’s railways minister, said in Kolkata.
In addition to its planned protest the party also issued a 72-hour deadline for the government to withdraw the reforms, setting up a tense political drama for next week.
Indian newspapers broadly hailed the “rush of reforms” unveiled by Singh’s government.
His beleaguered administration, widely criticized for its ponderous and timid decision-making, had opened the “reform floodgates,” according to a headline in the Mail Today tabloid.
“From Paralysis to Rush of Reforms,” read the front page of The Times of India, the most widely circulated English-language daily, while editorials in The Hindu newspaper said the government was “going for broke.”
Part of the proposed economic changes outlined on Friday include allowing foreign supermarket chains such as US-based Walmart or UK-based Tesco to own up to 51 percent in Indian subsidiaries in a proposed change that was withdrawn last year due to fierce resistance.
Shopkeepers, opposition parties and even an ally in the national coalition opposed the move saying it would destroy the livelihoods of the small business owners who dominate the retail sector.
The government sees foreign supermarkets as a way to improve food supply chains, particularly with refrigerated facilities, as well as a means to create millions of jobs and bring down food prices.
Further editorial comment on the new changes included The Business Standard which said: “As if on a steroid, the government cleared all that had been seemingly ‘undoable’ till now, in spite of the frowning allies and the opposition.”
However, the Indian Express newspaper said in an editorial that Singh would now be tested by the sort of resistance which has led him to roll back difficult decisions in the past.