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Indian PM defends 'rush of reforms' as protests grow

Pratap Chakravarty
Indian Prime Minister Manmohan Singh (pictured) on Saturday defended a string of economic reforms unveiled by his government, despite protests over higher fuel prices and new foreign investment rules.

Indian Prime Minister Manmohan Singh defended on Saturday a string of economic reforms unveiled by his government, despite protests over higher fuel prices and new foreign investment rules.

Singh, speaking to ministers and advisers in New Delhi, said the reforms were needed to revive flagging economic growth, improve the investment climate and boost public finances.

"The recent increase in diesel prices is an important step in the right direction," he said, following a decision on Thursday to hike the heavily subsidised price of the fuel by 12 percent.

Truckers unions have since threatened to go on strike and there were protests on Friday over the halving of the number of subsidised cooking gas cylinders available to households per year.

On Friday the cabinet also cleared highly contentious new rules inviting foreign supermarkets into the Indian retail sector and allowing foreign airlines to take stakes in domestic carriers.

"To achieve the target of 8.2 percent growth (contained in a new five-year economic plan), we need to revive investment in the economy. The investment environment is therefore critical," Singh said.

India was dependent on inflows of foreign capital because of imbalances in its spending and consumption patterns, the under-fire 79-year-old explained.

The prime minister warned a worst-case scenario of a "policy logjam" could prompt economic growth to plummet.

"It reflects a situation where, for one reason or another, most of the policies needed to achieve are not taken," Singh told his policy planners.

"If this continues for any length of time, vicious cycles begin to set in and growth could easily collapse to about five percent per year, with very poor outcomes on inclusion," the premier warned.

The Trinamool Congress, a regional partner in Singh's multi-party coalition, mustered several thousand supporters in its power base of West Bengal state on Saturday, to press its demand for a roll-back of the changes.

Police said despite a heavy downpour, around 10,000 Trinamool activists, including children, have gathered in the heart of state capital Kolkata in a show of defiance against the government's decisions.

"Rallies are also being held across West Bengal to mobilise public opinion against (a) rise in diesel prices," said Subrata Bakshki, a party MP.

Trinamool leader and West Bengal chief minister Mamata Banerjee warned party leaders would meet on Tuesday to decide their "next course of action".

"We cannot support anything that is against the interest of the poor and common people," she told reporters late Friday night.

India's four main communist parties were also planning to stage an orchestrated protest on Thursday, Communist Party of India's National Council Secretary Atul Kumar Anjaan told AFP.

"Left parties along with several democratic parties and organisations have decided to hold a nationwide protest day on September 20 against the opening of the retail sector to foreign investment," Anjaan said.

He said the combined protest was also aimed at forcing the government to roll-back the increased price of diesel.

Indian newspapers broadly hailed the "rush of reforms" unveiled by Singh's government.

Singh's beleaguered administration, widely criticised for its ponderous and timid decision-making, had opened the "reform floodgates", according to a headline in the Mail Today tabloid.

"From Paralysis to Rush of Reforms", read the front-page of The Times of India, the most widely circulated English-language daily, while editorials in The Hindu newspaper said the government was "going for broke".

India's once-booming economy has been hit by a combination of high interest rates, Europe's debt crisis that has blunted exports, stalled government reforms and sluggish investment.

It grew just 5.5 percent in the March-June quarter -- holding at a three-year low.