PM Singh fails to dispel policy paralysis fears

NEW DELHI Wed Jun 29, 2011 4:41pm IST

Prime Minister Manmohan Singh speaks at a joint news conference during the BRICS (Brazil, Russia, India, China and South Africa) summit in Sanya, on the southern Chinese island of Hainan, April 14, 2011. REUTERS/Press Information Bureau of India/Handout/Files

Prime Minister Manmohan Singh speaks at a joint news conference during the BRICS (Brazil, Russia, India, China and South Africa) summit in Sanya, on the southern Chinese island of Hainan, April 14, 2011.

Credit: Reuters/Press Information Bureau of India/Handout/Files

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NEW DELHI (Reuters) - India's cornered Prime Minister Manmohan Singh brushed aside on Wednesday widespread criticism that he was a "lame duck" leader presiding over a government mired in graft and policy paralysis, but offered little in way of policy steps he would take up.

The prime minister met five domestic media editors in an attempt to overhaul his reputation as out of touch with the country, with corruption scandals and stubbornly high inflation eroding confidence in his coalition government.

As the government fights the backlash from the scandals, investors are increasingly worried it will not push through reforms to support long-term growth in Asia's third largest economy, including an overhaul of its land acquisition policy, taxation system and foreign direct investment rules.

"I think the market will be looking for actions rather than comments," said Samiran Chakraborty, regional head of research at Standard Chartered Bank in Mumbai. "Confidence can come back only when there is perceptible movement in the policy stance. Before that, a cabinet reshuffle can bring in some hope."

Singh said, according to editors present at the meeting, that he was not leading a "puppet government" with the real power held by Congress party leader Sonia Gandhi and her advisers -- although that is a view widely held in India.

He denied speculation he would be replaced by Rahul Gandhi, the 41-year-old son of Sonia who has long been seen as a prime-minister in waiting, saying that was not on the party's agenda.

"He agreed that there was a perception (of crisis) but that the perception is wrong ... he is not a lame-duck prime minister," Kumar Ketkar, editor of Divya Marathi newspaper, told reporters after talks with Singh.

Analysts were unimpressed with the message from Wednesday's meeting, comparing it with Singh's last interaction with the media in February when the prime minister had voiced similar sentiments but ended up doing little to back them up.

Singh was critical of the media, calling it "accuser, prosecutor and judge" rolled into one. It was his third formal interaction with the media in his seven years in power.

The prime minister repeated that he would reshuffle his cabinet "soon" but declined to say whether there would be significant changes in top positions, according to two editors present at the meeting in the capital.

Singh has been criticised for not firing inefficient or graft-tainted ministers and his perceived inaction has taken off the sheen from his image as the economist who ushered in India's economic boom when he was finance minister in the 1990s.

SUCCESSION, NOT IF BUT WHEN

Singh was again forced to discuss the issue of who would succeed him and whether it would happen soon.

A senior Congress party member and the interior minister have this month publicly praised Rahul Gandhi

as having the skills to be prime minister, hinting that Congress members were increasingly anxious to change leadership. Singh said he would be happy to make way for the young leader.

"I don't mind young leaders taking over ... but the question has not been put on the agenda or raised by the party," Singh said, according to editor Ketkar.

Singh's premiership has been besieged by graft scandals, including a $39 billion telecoms scam that saw former telecoms minister A. Raja arrested and parliament suspended by opposition protests.

Those scandals have been the focus of widely popular fasts by activists and the government's handling of the protests has added to the view it is out of touch with public sentiment.

"I'll be very blunt. The government has committed one blunder after the other," said N Bhaskara Rao, chairman of New Delhi-based think-tank Centre for Media Studies.

Congress was expected to push through a series of long-delayed economic reforms after winning a second term in office in 2009, but little progress has been made.

The government's inability to combat high inflation, exacerbated by fuel price rises this month, has led to widespread public anger, and damaged voter confidence in the ruling party with elections looming in 2014.

Economic growth is expected to slow down on high inflation and interest rates, with few expecting the government to be able to tame inflation, and fiscal deficit targets looking like an ambitious goal.

Three-quarters of India's leading companies have lost faith in the prime minister, and believe that a governance crisis and policy limbo will hit economic growth and their investment plans, a survey said this month.

Still foreign and domestic investors point out that the opportunities in India often outweigh the challenges, with its relatively untapped market with huge growth opportunities compared with those in struggling industrialised economies.

(Additional reporting by C.J. Kuncheria in New Delhi and Swati Bhat in Mumbai; Writing by Paul de Bendern; Editing by C.J. Kuncheria and Robert Birsel)

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