NEW DELHI (Reuters) - The government and opposition parties failed on Monday to break a deadlock in parliament over an investigation into a widening corruption scandal that has prevented economic reforms being approved.
The opposition has halted parliament sessions since Nov. 9 over demands for a full investigation into the disputed sale of telecoms licences and spectrum worth billions of dollars in the world's fastest growing mobile phone market.
The Congress party-led coalition government has so far refused the request, saying there is no need for one as a separate investigation is underway.
"We told the government if you allow (a joint parliamentary probe) we will immediately end the deadlock," Sushma Swaraj, a leader of the main opposition Hindu-nationalist Bharatiya Janata Party, told reporters.
The scandal has wide-reaching implications because of the size of the telecoms market in India -- currently nearly 700 million mobile phone subscribers, second only to China -- and the large investments involved. If significant wrongdoing is revealed it would reverberate across political and corporate India.
The government is not at risk of collapsing but the scandal has weakened its ability to move key economic measures through parliament, and the latest disruptions will further push back legislation including introducing comprehensive tax reforms and opening up the retail sector to foreign companies.
No major reforms were expected this session but the government had planned to pass a banking laws amendment bill, which would improve the capital raising capacity of India's biggest commercial lender and strengthen central bank regulatory powers.
Still, India remains a hot investment destination with economic growth forecast at 8.5 percent in fiscal 2010/11 and 9-10 percent in following years.
Financial markets in Mumbai shrugged off the deadlock in the capital on Monday. But analysts said telecoms stocks would remain vulnerable given the possibility that the government would be forced to review licences or spectrums already issued.
Former Telecoms Minister Andimuthu Raja, who was forced to resign a week ago, is accused of selling licences and spectrums too cheaply in 2007-2008, possibly costing the state $39 billion in revenue, according to an official watchdog audit.
Raja is a member of the DMK, a small but crucial political party from Tamil Nadu that the Congress party relies on for maintaining a majority in parliament. Raja denies any wrongdoing.
Swan Telecom, now owned by the UAE's Etisalat, and a part-owned unit of Norway's Telenor were among those singled out by the comptroller and auditor general for irregularities and improperly obtaining licences.
Etisalat DB, formerly Swan Telecom, could not be reached for comment. Telenor has denied any wrongdoing.
The alleged telecoms scam has raised questions on whether any individuals received kickbacks for selling licences cheaply. Indian media have reported that some licences were given to shell companies for almost nothing and then sold off for vast sums.
Industry leaders Bharti Airtel and Vodafone are also in the dock over allegations that when their networks were at full capacity they got extra spectrum for free when they should have paid hundreds of millions of dollars.
A representative of Singh will answer questions in the Supreme Court on Tuesday, part of a request from the court for disclosure on how the prime minister handled the issue.
On Monday, the Supreme Court questioned the government's appointment of P.J. Thomas as India's chief vigilance commissioner, the head of a body charged with monitoring corruption, due to a pending criminal case against him.
Corruption has long been a major problem in Asia's third-largest economy, affecting every layer of society.
The party has come under attack in recent weeks, forcing it to fire three senior officials over corruption allegations, including over the problem-riddled Commonwealth Games. Several lower-ranking officials are now also under arrest.
India was ranked 87th in a 2010 ranking of 178 countries by anti-corruption group Transparency International, based on the perceived level of corruption. Rival China was ranked 78.
Additional reporting by Krittivas Mukherjee and C.J. Kuncheria; Editing by Andrew Marshall