PM Singh Resumes Role As Promoter Of Liberalization In India
India's Prime Minister Manmohan Singh, after being pilloried by the press, the opposition and Indian business elites for political immobilism and timidity, confounded his critics last Thursday by three bold measures.
He opened up retailing to foreign investment, thus clearing the way for the entrance of international food giants such as Tesco and Carrefour and discount retailers such as Walmart.
The government cut the subsidy on fuel (raising prices by 14%).
It also limited to six per annum the amount of cooking gas cylinders available at subsidized prices to families.
The government paid a price in terms of defections. The Chief Minister of West Bengal, "Sister" Mamata Banerjee, a populist leader who ended years of Communist control of the state, has quit the ruling coalition. She claimed that the moves will hurt the poor and the Prime Minister was "selling the country" to foreign investors.
Today, an improbable alliance extending all the way from the Hindu nationalist BJP to the Marxist left, joined in a protest against the reforms which allegedly will impose a burden on the "common man and domestic retailers." The unions joined in and strikes paralyzed parts of India.
Having had the governments on the ropes on the corruption issue, the opposition is annoyed that the focus of attention has now shifted to the reform programs.
The logic of the reforms is compelling. Fuel subsidies aggravated a situation where oil imports --the main factor in the country's trade deficit -- remained impervious to the price rises on the global oil market. Opening the retail trade to the major global chains will provide the needed foreign investments to obviate a situation where a quarter of agricultural produce never reaches the market due to spoilage. The new chains will bring in fleets of refrigerated trucks that Indian retailers can only dream about.
On the other hand, opponents have expressed fears that once the foreign chains have moved in, they will quickly put domestic competitors out of business by offering cheaper prices at the outset, but raising them once they are in charge.
Keith Vaz a British Labour Party MP of Indian origin, who was ousted after having served 25 years in Parliament, was very wary about the reform ""If India allows big Super Markets to come there, they will not hesitate to have the same dominance as in the USA. I don't think it is good for common man."