Ally pulls out of India’s ruling coalition

India’s government has lost its majority with a crucial ally finalising its divorce from the coalition, but it has been saved from the immediate risk of collapse by securing the support of a regional party.

Six ministers from the regional Trinamool Congress party handed in their resignations to the prime minister, Manmohan Singh, and president on Friday in a move prompted by a row over a series of economic reforms rolled out in the last week.

“We tendered our resignations and we have given our letter of withdrawal of support from the union government,” Trinamool’s Saugata Roy, who served as junior urban development minister, said.
 
All 19 Trinamool parliamentarians will now join the opposition ranks, bringing an end to an uneasy alliance inside the left-leaning coalition and leaving Singh’s Congress party dependent on outside support from other parties in parliament.

But while analysts said Trinamool’s departure increased the prospects of early polls, Singh appeared in no immediate danger after the regional Samajwadi Party vowed to keep out the opposition BJP party and their Hindu nationalist agenda.

Singh, who has not spoken in public since Saturday, was set to make a rare televised address to the nation later on Friday at 8pm local time (14:30 GMT) to explain the reforms and the political changes.

Years of tension

It was unclear if Samajwadi, whose 21 MPs generally back the government, would join the coalition formally and take up posts in the government when Singh reshuffles his cabinet.

“We will not allow communal forces to come into power. Why should I withdraw support to the Congress?” Mulayam Singh Yadav, Samajwadi party chief, said in New Delhi.

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 increasing the price of subsidised diesel.

Mamata Banerjee, Trinamool chief, initially gave the government 72 hours to withdraw the measures, then announced that her party would quit on Friday unless her demands were met.

She accused the government of allowing in foreign supermarkets in “an undemocratic and unethical manner”, while speaking at a function in Kolkata on Friday.

“The government is selling out the country. You will lose your land, shops and livelihood if the decision is implemented,” she said.

Even Samajwadi’s chief Yadav, a wrestler-turned-politician, is against foreign supermarkets entering India, underlining the difficulties the government will have in pressing ahead with promised new reforms in advance  of elections due in 2014.

Stock markets rally

P Chidambaram, India’s finance minister, unveiled new measures to boost the economy on Friday, indicating the administration was looking to build momentum and change the perception of a government bogged down for years in corruption scandals.

The changes aim to encourage investors to put extra money in the stock market and spur more domestic companies to borrow cheaply abroad, leading to fresh leaps on the Bombay Stock Exchange.

The benchmark 30-share Sensex Index closed up 2.2 per cent at 18,752.83 points, while the Indian currency also climbed, hitting a four-month-high against the dollar of 53.38 rupees.

News reports suggested the government was also preparing to raise the cap for foreign direct investment in Indian insurance companies from 26 per cent to 49 per cent.

Despite the blitz of measures, the government faces a broad alliance of opposing forces.

Shopkeepers, traders and labourers blocked railway lines and closed markets across the country on Thursday in a day of protest organised by trade unions and opposition parties.