The Congress-led UPA government is firm on the big bang reform measures announced on Friday, despite its key ally, Trinamool Congress’ Mamata Bannerjee setting a 72-hour deadline for the government to roll back the measures.
Mamata has demanded the withdrawal of Thursday’s diesel price hike and capping of supply of subsidised LPG cylinders, as well as the FDI measures announced on Friday.
The government is however firm on its decisions, ruling out a roll back. The Prime Minister has even appealed to the nation to support the reform measures.
The UPA government, ending months of perceived policy paralysis, yesterday pushed ahead with the boldest reforms yet in its current term by allowing 51 per cent foreign direct investment in multi-brand retail and opening up the aviation sector, triggering expected outrage among some of its allies as well as the opposition.
The government clarified that states which did not favour 51 per cent FDI in multi-brand retail - which opens up India's estimated USD 450 billion retail market to foreign supermarkets like Wal-Mart, Carrefour and Tesco - were free to not implement the policy.
The Cabinet also decided that overseas retailers setting up a single brand store in India must source at least 30 percent of their goods from Indian companies, preferably from micro, small and medium enterprises (MSMEs). Earlier it was mandatory for the overseas firms to source 30 percent of the goods from MSMEs.
While industry bodies welcomed the move, ally Trinamool Congress joined the angry chorus of the BJP and the Left to denounce the move, which the government insisted would not hurt India's national interests.
West Bengal Chief Minister and Trinamool Congress Mamata Banerjee was furious and said she would not stand for it.
In a stern warning to the Congress, Mamata said her Trinamool Congress party was ready to take hard decisions if the measures to hike fuel prices and FDI in retail were not reconsidered.
Expressing shock, she said: "Loot is going on in the country."
"We cannot support price hike on diesel and reduction in subsidized LPG cylinders. Today, a decision has been taken allowing FDI in retail sector. It is a big jolt. We are really sorry," Banerjee posted on her official Facebook page.
"We cannot support anything that is against the interest of the poor and common people. Loot cholchhe loot (Loot is going on in the country)," she said.
Fuming over the "anti-people" decisions, the Trinamool – UPA's second largest constituent earlier – yesterday gave a 72-hour deadline to the Congress to rethink the decisions.
Banerjee said that her party was very much serious about the recent developments and were ready to take hard decisions.
"Sometimes speech is silver and silence is golden. We are not party to it. We are not supporting these anti-people decisions. We are very much serious about these developments and ready to take hard decisions if these issues are not reconsidered," Banerjee posted.
According to Trinamool MP Kunal Ghosh, the party's parliamentary board will meet on Tuesday to take a final decision, which could even lead to withdrawal of support from the government. "All options are open. We are ready to take any kind of strong decision," he said.
BJP and Communist leaders called the decision a "betrayal" of the people's interests.
"This is a complete betrayal, also of parliament," BJP MP Balbir Punj said. Communist Party of India's D Raja said a corruption-tainted regime was trying to salvage its image.
The BJP, whose opposition to the coal block allocations paralyzed Parliament's Monsoon Session, vowed to unleash nationwide protests against the FDI unveiling.
The reform measures come at a time when the government's reputation has been battered by a host of alleged scams and Prime Minister Manmohan Singh's reputation as a reformer has taken a dent, with a leading US daily portraying him as "a tragic figure" and Time magazine describing him as "an underachiever".
Manmohan Singh was the prime mover behind this audacious but politically fraught decision.
Informed sources said he reportedly pushed for the decision at the meeting of the Cabinet Committee on Economic Affairs (CCEA), saying the UPA government needs to "bite the bullet".
"We have to bite the bullet. If we have to go down, let us go down fighting," the PM was quoted by the sources as having said there.
The government also approved FDI in aviation and gave its nod for disinvestment in four PSUs, part of a package of reformist measures, along with the steep hike in diesel prices announced on Thursday, which are widely seen as aimed at shoring up the faltering economy and the international standing of India that has taken a severe beating in recent months.
Soon after the decisions were made known, the prime minister appealed to the people to support the government's steps that were "taken in national interest".
"I urge all segments of public opinion to support the steps we have taken in national interest," the PMO's Twitter handle quoted him as saying. "I believe that these steps will help strengthen our growth process and generate employment in these difficult times."
The decision could potentially be a game-changer for India's retail market, which is dominated by neighbourhood stores.
Commerce Minister Anand Sharma too defended the sweeping policy changes, viewed as a major step to spur economic reforms.
"It is not a sudden decision," Sharma told the media, explaining the decisions taken on Friday.
The minister said the decision was first taken last November but subsequently held back following opposition mainly from the Left, BJP and the Trinamool.
But it was "never rolled back", Sharma clarified.
He said since then the government had held intense discussions with various stakeholders with a view to creating broad consensus. He said among those who were spoken to were farmers associations, civil society groups, regional chambers of commerce and industry as well as state governments.
"I had personally written to every chief minister of the country, spoken to almost all of them. There are states which reacted to the proposal very well, some expressed opposition. The response has been a mixed one."
According to the government, the move comes with some conditions for the investors.
Sharma said multi-brand FDI was expected to generate a large number of jobs in rural India besides giving remunerative prices to farmers for their products.