Indian premier vows to continue policy push as ruling coalition splinters

New Delhi • Indian Prime Minister Manmohan Singh vowed to unveil more policy changes to spur growth, saying last week's biggest opening to foreign investment in more than a decade would restore confidence in the economy.

In a rare prime-time speech to the nation Friday, a resurgent Singh challenged claims made during a nationwide strike Sept. 20 that the decisions to welcome foreign retail chains and raise diesel prices would hurt the poor. Only rapid growth would generate millions of jobs the country needs and ensure revenue for health and education spending, he said.

"The time has come for hard decisions," Singh said in the 15-minute speech from his office that was broadcast by state television. "We need to do more, and we will do more," he said, drawing parallels with 1991 when as finance minister he engineered the opening of India's failing economy.

Singh's burst of policy making following almost two years of legislative paralysis comes as he bids to revive an economy growing at near its slowest place in three years, and restore public support for an administration mired in allegations of corruption and incompetence.

The defense of his agenda also comes as the ruling Congress party is maneuvering to shore up support for the governing coalition after its largest ally, the Trinamool Congress, quit in protest, saying allowing foreign retailers to enter the country would harm small shopkeepers.

While the government is now about 24 seats short of a parliamentary majority, the exit of a party that had opposed a raft of proposals, together with a pledge of support from a key regional group, helped propel Indian shares to their highest close in 14 months yesterday.

Rupee surge • The rupee surged to its strongest level in four months as the government reduced tax on local companies' overseas borrowing and confidence in the government's ability to remain in power grew.

"The prime minister and Congress leadership must be feeling relieved as Trinamool was an obstacle to reforms since the beginning," said Satish Misra, a political analyst at the Observer Research Foundation in New Delhi. "The government becomes relatively free to take hard policy decisions."

Six Trinamool ministers yesterday handed Singh their resignations and informed President Pranab Mukherjee the party was ending support to the ruling alliance, Trinamool lawmaker Saugata Roy said.

Singh, Finance Minister Palaniappan Chidambaram and Congress party chief Sonia Gandhi may have judged that parties unlikely to perform well in snap elections or who fear handing victory to rivals are unlikely to try to topple the government and may even vote in favor of further economic liberalization.

'Support clear' • The leader of one of those groups signaled his backing.

"Our support is clear," Mulayam Singh Yadav, the leader of the Samajwadi Party, the third-largest party in Parliament, told reporters yesterday. "We will not let communal forces come to power," he said, referring to his bitter opponent — and Singh's chief adversary — the Hindu-nationalist Bharatiya Janata Party. The Samajwadi Party would continue to oppose the retail policy, Yadav said.

"After three years of rule from which it doesn't have much to show, the government is willing to risk everything to get these laws passed," said P. Phani Sekhar, a fund manager at Angel Broking Ltd. based in Mumbai. "It is now do or die for the government."

Singh's Congress party-led government for the first time published the rules allowing foreign investment in industries including multibrand retail, aviation, broadcasting and power exchanges, making them effective immediately, according to a statement Thursday.

BJP fear • In a series of full-page advertisements in the country's leading newspapers yesterday, the government defended the decision to allow the entry of foreign retail chains, saying it will benefit farmers and consumers. The steps will help create 10 million jobs, develop cold-chain infrastructure, and reduce wastage of food and vegetables that rot before reaching stores, the commercials said. Singh made the arguments in his speech.

The Samajwadi Party, which draws support from the Muslim community in Uttar Pradesh and supported the nationwide strike against the new retail policy, will be concerned that an election in the next few months would bring the BJP to power, according to Angel Broking's Sekhar.

"Many of the other political parties may want to pull the rug from under the feet of the government, but not yet," he said. "That helps buy Congress time to turn things around."

Mayawati's Bahujan Samaj Party, which has 21 lawmakers in the lower chamber, was routed in this year's assembly elections in Uttar Pradesh, the country's most populous state, and is unlikely to want to face voters again so soon. Lawmakers from her party will take a call on whether to continue to offer outside support to the ruling coalition at a meeting Oct. 10.