Protests over fuel prices paralyse parts of India

By Krittivas Mukherjee, Reuters, in Delhi

Tuesday, 6 July 2010

Opposition workers set buses on fire and hurled stones as a nationwide strike over higher fuel prices shut down parts of India yesterday in a test of the government's efforts to cut subsidies and trim a budget deficit.

The response to the strike, the biggest by the opposition in recent years, was mixed and analysts said the government was unlikely to back down. There was a total shutdown in opposition-ruled states. However, business was mostly normal in regions ruled by the Congress Party that also heads the central government.

Many flights were cancelled and streets emptied in response to the strike called by the main opposition Hindu-nationalist Bharatiya Janata Party (BJP) and the leftist bloc as the Congress attempts to push key reforms. The government is expected to stick to its decision, encouraged by tacit support from parliamentary allies and the fact the strike was successful only in opposition strongholds.

"This is a case where the opposition has come together on an immediate issue, but it doesn't mean this will bring pressure on the government to roll back the hike in petrol prices," said D H Pai Panandiker, head of the think tank, the RPG Foundation.

"The need for fiscal prudence is far greater than populism and the government understands that."

The government retained power last year largely on a social-spending agenda but says it must curb costly subsidies to stay on target to cut the deficit to 5.5 per cent in 2010/11.

Yesterday, businesses were largely shut in the financial capital, Mumbai, though stock and bond markets were open. One industry lobby put the cost of the strike at more than $640m (£423m) in lost business across India.

With an eye on elections in the coming months, the Congress Party's allies will publicly complain about inflation but analysts said that they still support the measures. However, they are are likely to be less supportive of more painful reforms that Prime Minister, Manmohan Singh, wants to push through, such as opening up the insurance and banking sectors.