India’s summer of discontent
Political paralysis plus economic turmoil equals a country suddenly tottering, reports Neerja Chowdhury
REU TERS J Jayalalithaa
BABU/REUTERS Naveen Patnaik
The weakening of the rupee to an all-time low in rela- tion to the dollar, the slump of the Bombay stock exchange’s index Sensex to below the 16,000 mark,
and a mood of helplessness that prevails at the political
level have suddenly pressed panic buttons about the return
of a ‘1991-like situation’ in India, when New Delhi had to
mortgage its gold and go to the International Monetary
Fund for help.
Though Indian Finance Minister Pranab Mukherji said
there was no need for panic, he admitted that he would
have to take ‘some austerity measures,’ which is interpreted
to mean cuts in subsidies. There are indications that the
Indian government will raise the prices of petrol and diesel
soon after the Budget session of parliament is over, and try,
once again, to push the proposal to bring foreign direct
investment in multi-brand retail, which had been put on
the backburner, thanks to the opposition by West Bengal
Chief Minister Mamata Banerjee.
There was the unusual stopover by Secretary of State
Hillary Clinton in Kolkata, even before she had met with
the leadership in Delhi, to call on Banerjee, and it remains
to be seen if the Clinton visit managed to soften the chief
minister, who has been bargaining hard with New Delhi to
get a financial package for her cash-starved state.
Indian Prime Minister Manmohan Singh called a high-level, stock-taking meeting to review the slide of the rupee,
and after it, the head of the Prime Minister’s Economic
Advisory Council, C Rangarajan, made a case for more
‘proactive’ steps to encourage capital flows into the economy to put it back on the growth trajectory.
After being put on the back foot by its allies, the govern-
ment is once again stepping up efforts to try and allay the
fears of the foreign investors. Some suspect that the gov-
ernment may be deliberately trying to let some panic
spread so as to jolt its allies —and public opinion — to
allow subsidy cuts and the big-ticket reforms that have
been hanging fire. The opposition Bharatiya Janata Party
has also climbed down in its opposition on some reforms,
like the one on pensions.