NEW DELHI: India's Prime Minister Manmohan Singh faced a crunch day Friday in his bid to drive through economic reforms, with a one-time coalition ally set to formally withdraw support from his beleaguered government.
Barring an unexpected last-minute compromise, six ministers from the regional Trinamool party were to resign their posts in New Delhi and its 19 lawmakers will end their uneasy alliance inside the coalition, which came to power in 2009.
The move will leave Singh's Congress party running a minority government, dependent on outside support from other regional parties and vulnerable to falling before the scheduled date for the next national elections in 2014.
“We have enough friends and we will continue working for the greater good of the economy,” reformist Finance Minister P. Chidambaram told reporters on Thursday, indicating Congress had no intention of compromising.
Years of tension between Congress and Trinamool exploded last week after Singh's government announced a string of reforms including allowing foreign supermarkets into the retail sector and hiking the price of subsidised diesel.
Fiery Trinamool chief Mamata Banerjee initially gave the government 72 hours to withdraw them, then announced on Tuesday that her party would quit on Friday unless her demands were met.
“The chairperson of the TMC (Trinamool) clearly spelt out the three issues,” vice-president and spokesman Derek O'Brien told AFP, saying the supermarket reform and changes in diesel and gas policy should be reversed.
If the demands were not met by 3:00pm (1130 GMT) on Friday, Trinamool would complete its withdrawal, he explained.
Banerjee has said she is “totally against” the idea of opening India's retail sector to global chains such as Walmart and is angered by the hike in diesel prices. She has accused the left-of-centre Congress party of being “anti-poor”.
On Thursday, shopkeepers, traders and labourers blocked railway lines and closed markets across the country in a day of protest organised by trade unions and opposition parties.
But having ruled out a reversal that would be a severe blow to his already diminished reform credentials, Singh is in no mood to capitulate to a party such as Trinamool, which has one tenth the number of seats in parliament as Congress.
He will now look to two regional parties from northern Uttar Pradesh for support, the Bahujan Samaj Party (BSP) and the Samajwadi Party (SP), most likely from outside the coalition.
Mulayam Singh Yadav of the Samajwadi Party told reporters Friday he would continue to support the government from outside the coalition even though he disagreed with its decision to open the retail market to foreign giants. He said he needed to keep communal forces from coming to power, an apparent reference to the Hindu nationalist Bharatiya Janata Party.
The SP, which has backed the government at crucial times in the past, is also calling for the supermarket reform to be reversed, however, and its leader has repeatedly warned about the possibility of early elections.
Despite being at the forefront of protests against the reforms, the main opposition Bhartiya Janata Party (BJP) has been reluctant to go for the kill against Congress, with analysts saying it is ill-prepared for early elections.
“Felling this government and forcing an election is not our sole purpose,”said party president Nitin Gadkari. “We have not thought about bringing any no-confidence motion.”Analysts say Singh and his boss, the more left-leaning Congress party president Sonia Gandhi, appear to have been finally convinced reforms are necessary to improve India's bleak economic outlook.
Reports on Friday said that Singh was expected to give a televised address once Trinamool had quit the coalition to justify the reforms.
Deteriorating growth, a ballooning fiscal deficit along with the threat of losing its investment grade status “all played a role in forcing the hand of authorities”, said Credit Suisse economist Robert Prior-Wandesforde.
“It's a shame that the government waited so long to take action, but, as is often the case in India, it requires near crisis conditions before anything is done,” he said.
Singh's administration has been roiled by a string of corruption scandals that have put it on the defensive almost since the last elections in 2009.
With legislation held up by a perceived lack of political courage as well infighting in the coalition, optimism about India's once vibrant prospects has slowly drained away.