India's big bang Friday reforms may stick

Sep 17 2012, 13:39 IST
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SummaryEconomic crisis is deeper than last year and a U-turn now would seriously discredit efforts to salvage it.

There were quiet celebrations in the offices of India n Prime Minister Manmohan Singh late last week after he stunned the country with a slew of steps to revive the tanking economy.

In the space of 24 hours, Singh had dispelled the image of an elderly ditherer and demonstrated - two decades after he launched India 's transformative drive for economic liberalisation - that he remains a champion of reform.

People were very happy, one aide to the Oxford-educated economist told Reuters. There were no high fives, but people in the office were very satisfied.

So is this another nuclear moment for Singh, an echo of 2008 when he put his job on the line to push through a controversial civilian nuclear deal with the United States? Or is he still the wavering leader who backtracked on key economic policies three times in the past year to fend off protests?

Singh's government, already weakened by a string of corruption scandals, will inevitably face a political backlash over the reforms, perhaps enough to make him stop short of the difficult steps still needed to tackle a gaping fiscal hole.

But the signs are that this time the prime minister will stick to his guns, if for no other reason than because he may well have run out of alternatives.

It will take courage and some risks but it should be our endeavour to ensure that it succeeds, Singh told a group of government economists on Saturday. The country deserves no less.

His Congress party, which heads an unruly coalition, also seems confident that it can survive the onslaught.

In conversations with Reuters, several party and government officials said Congress leader Sonia Gandhi assessed the risks of losing coalition allies over the reforms which could force an early election - and concluded they were safe.

The calculation will be that these people will make noise but will not pull the plug, said Neerja Chowdhury, a political analyst, after the first of last week's bold steps, a sharp increase in heavily subsidised diesel prices.


Once seen as India 's answer to Deng Xiaoping, who set China on the road to a market economy, Singh - who will be 80 next week - had seen his reputation crumble in recent months. In July, Time magazine dubbed him an underachiever unwilling to grasp the nettle of reform as economic growth sagged.


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