(Adds quotes, details)
By Sujoy Dhar
KOLKATA, India, Sept 18 The biggest ally in
Prime Minister Manmohan Singh's government pulled out of the
ruling coalition on Tuesday, escalating a political firestorm
over big-ticket reform measures launched last week to revive
India's flagging economy.
Mamata Banerjee, the chief minister of West Bengal state,
had demanded the government reverse its decision to raise diesel
prices and open India's supermarket sector to investment from
foreign chains such as Wal-Mart Stores.
Her withdrawal and that of her 19 MPs in the lower house of
parliament is unlikely to destabilise the government in the
short term as Singh's Congress party can count on other parties
But it might embolden Banerjee and other parties to
intensify ongoing protests against unpopular economic policies
that the government sees as crucial to reining in a bloated
fiscal deficit and improving investor sentiment.
"The government has lost their credentials. If they cannot
keep their friendship with us, they cannot keep it with anyone,"
Banerjee told reporters after a meeting of her Trinamool
Congress party (TMC) in the eastern city of Kolkata, where her
state government is based.
Banerjee has also withdrawn half a dozen ministers in the
government, the most high profile being the railways ministry
portfolio. They will submit their resignations on Friday, she
A popular backlash against retail liberalisation forced the
government into an embarrassing climbdown on the reform last
year. Singh revived the measure on Friday, although opponents of
the policy have vowed to reverse it once again.
But Singh's Congress party appears confident of surviving
the opposition against the reforms and has held firm against
calls for the measures to be rolled back.
Several party and government officials have told Reuters
that Congress leader Sonia Gandhi had assessed the risks of
losing coalition allies over the measures and concluded th e
go vernment wa s safe.
Banerjee came to power in West Bengal in 2011, ending more
than three decades of Communist rule in the state. Colloquially
known as "Didi", or "elder sister", Banerjee's supporters hail
her as a champion of India's poor and dispossessed.
But her politics are a thorn in the side of the government.
Her protests had been instrumental in blocking a slew of
economic measures, from retail reform to allowing foreign direct
investment into India's aviation and insurance sectors.
"We waited enough time," Banerjee said. "They have to
withdraw FDI in retail if they want us to stay, they have
reverse their decisions on LPG subsidy and diesel hike."
(Writing by Matthias Williams; additional reporting by Arup
Roychoudhury and Annie Banerji; editing by Ross Colvin)