The speech came hours after Mamata Banerjee's Trinamool Congress, the second-largest member of his coalition, withdrew support over the government's decision to increase diesel prices and open up the retail sector to foreign mega-stores like Wal-Mart, and the PM explained the rationale behind taking those tough decisions. "World fuel prices are going up, we have tried to insulate you. Subsidies on fuel are very large, though, and the subsidy bill would have shot up to more than 2 lakh crores. Where will we find the money for this? Money does not grow on trees," he said.
He also sought to allay fears that FDI in retail would wipe out small retailers. His government, he said, was imposing conditions to ensure needs and interests of farmers and small retailers were protected. "In a growing economy, there is space for big and small to grow... Farmers will benefit, they will get better rates for their produce. The growth of organised retail will also create millions of good quality new jobs," he promised.
And in an obvious reference to Mamata Banerjee's adamant stance that FDI in retail must be withdrawn, the PM underscored that every state had been given the opportunity to choose whether or not to implement FDI in retail, but said, "No state has the right to prevent others from introducing retails in reform to help its farmers and shopkeepers.
The PM hit out at political parties that have opposed these reforms saying, "Don't be misled by those who want to confuse you by spreading fear and false information. I know what happened in 1991 and I would be failing in my duty as PM of this great country if I did not take strong preventive action. Misinformation was used in 1991 as well when we brought in reforms but those behind it did not succeed then, they will not succeed now."
Speaking first in Hindi, the PM explained that if fiscal deficit went up any further, investors would lose confidence at home and abroad. Other countries, he said, needed bailouts because they did not take the required steps and he was determined that India would never be close to this situation. "But I can only be successful if you understand why we are doing these reforms," he said.
These reforms, Dr Manmohan Singh said, were necessary in difficult economic times. "The government has the responsibility to work in the interest of the country and people for progress. Creating employment is important, especially in rural areas. The challenge is to implement this during a world recession. To some extent, we have been successful," and also said, "It is my responsibility to take tough decisions in our larger interest."
Industry though is cheering Dr Singh's reforms and wants more. "A very balanced address, he clearly explained that these steps were very necessary. His comparison with 1991 was very apt. I am impressed with the action last week and today's speech; the government has good support. Mamata's pullout may strengthen the government - the stock market went up and the rupee appreciated. A stronger rupee will lead to lower inflation," said Adi Godrej, chairman of the Godrej Group and president of CII.
Kiran Majumdar Shaw, CMD Biocon welcomed the speech as "a very cogent explanation of the urgency for reforms. He reached out to the people to explain how he can't afford India to reach a situation like some European countries where people are losing their jobs. I wish he had done this earlier. We can't have a prime minister who keeps large periods of silence."
The PM's speech came at the end of a long day of political drama. Before he spoke to the nation, he accepted the resignation of the six ministers of Mamata Banerjee's Trinamool Congress, bringing a turbulent chapter to a close. Even the opposition concedes that the ruling UPA is not in any imminent danger after Ms Banerjee's exit because regional heavyweights Mulayam Singh Yadav and Mayawati will continue to lend external support despite differences over the economic reforms the Prime Minister has introduced. "Unfortunately, the government will use its survival as an endorsement of its policies," said Left leader Sitaram Yechury.
Senior ministers have pointed out that between them, Mr Yadav and Mayawati contribute 43 MPs, taking the UPA safely past the 272 votes it needs to remain in power. A vote of confidence, they said, is therefore not required. The Manmohan Singh government meanwhile is clear that this phase of reforms is necessary and here to stay, though minister in the PMO, V Narayanasamy did say that the government would push reforms that could be "implement without much difficulty."
New reforms cleared on Friday included slashing a tax on overseas borrowing by Indian firms and implementing a scheme to encourage individuals to invest in the stock market. The government also hopes to allow more foreign investment in the insurance sector and reduce sugar subsidies for the poor - the price of sugar available under the Public Distribution System or PDS could go up by Rs. 3. That may not go down well with allies like Mr Yadav and the DMK, who have objected to last week's increase in diesel prices and the cap on subsidised cooking gas for households.
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