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| Govt's new ally not rigid on economy (20) 09-Jul-08 10:19 | Tracked by (0) |
| | Posted by:  dineshsahay on ( 09-Jul-08 10:19 )
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| | | Tue Jul 8, 2008 9:28pm IST
Govt's new ally not rigid on economy
By Surojit Gupta and Mark Williams
NEW DELHI (Reuters) - The Samajwadi Party, whose support appears crucial for the survival of the government, said on Tuesday it would not be "rigid" on economic issues but wants a mechanism through which it can influence policy making.
The party has stepped in to fill the void left by communist allies of the Congress party-led ruling coalition, who finally walked away angry over the government's decision to forge ahead with a nuclear energy deal with the United States.
In an interview with Reuters at his south Delhi home, the party's general secretary, Amar Singh, a key intermediary in negotiating the alliance, rejected accusations his party was seeking the removal of key cabinet ministers.
But Singh, whose powerbase lies in the unruly politics of India's largest and poorest state, has a range of economic issues on which he and his party want the government to act, and he clearly wants to be widely consulted.
"We have not given unconditional support, we are not likely to give it either. It is issue-based, outside support; we are not joining the government. So I will expect issues to be resolved before they are taken up," Singh said.
"I will talk to (Prime Minister) Manmohan Singh and (Congress party head) Sonia Gandhi that one mechanism should be there, but what formal shape it should take, I am not in a position to articulate right now."
Local media reports have speculated the SP would seek the sacking of Finance Minister Palaniappan Chidambaram, Oil Minister Murli Deora and Reserve Bank of India (RBI) Governor Y.V. Reddy in return for its support, and the party has criticised the government's handling of spiralling inflation.
The communists, who provided the government with a majority in parliament for the past four years, used their muscle to block reforms to further open the economy. Plans to partially privatise state-run firms and allow larger foreign participation in insurance and pensions, for example, were shelved.
But they finally abandoned the government on Tuesday after the prime minister made it clear he would not budge on the nuclear deal, which the Left bitterly opposes as a threat to India's independent foreign policy.
"NOT RIGID"
Asked if his party would support a government attempt to sell stakes in state-run firms, something vociferously opposed by the leftist parties, Singh did not rule it out.
"To a great extent our economic policy is identical to that of the left. The only difference between us and the left is that we are not rigid in our attitude.
"If we are logically told and convinced, we can be on board."
Political uncertainty has rattled markets in recent weeks as the left parties threatened to pack their bags.
Amar Singh said the government should use India's foreign exchange reserves to allow the rupee to appreciate, helping the fight against inflation, which raced to 13-year highs above 11 percent in June. The rupee has fallen nearly 9 percent against the U.S. dollar since the start of the year and Singh said the central bank had allowed inflation to be imported into the country.
"We have got $300 billion in reserves, the sixth-largest in the world. This should be utilised to arrest further depreciation of rupee and at the same time control inflation effectively.
"The finance minister has the prerogative and not the RBI to fix the exchange rate. The government should act immediately to bring the exchange rate back to 39 rupees per dollar," Singh said. The rupee closed at 43.26/27 on Tuesday.
He estimated this measure alone would quickly bring down inflation by 2-4 percentage points: "It's a very simple demand."
The left parties -- led by the Communist Party of India (Marxist) -- have said they would approach the president on Wednesday and demand the government prove its majority in a vote in the lower house of parliament.
Amar Singh said the government could rely on SP support. "As far as my party is concerned, we are solidly going to back this government," he said.
Asked how many votes he could promise Prime Minister Manmohan Singh, he said: "Not less than 38."
The government needs 44 extra votes to secure a parliamentary majority, and is expected to get support from some smaller parties to bridge the shortfall.
The communists have 59 members of parliament and will likely be backed in any no-confidence vote by the main opposition party, the Bharatiya Janata Party.
Dineshsahay
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