Govt's new ally not rigid on economy

By Surojit Gupta and Mark Williams

NEW DELHI (Reuters) - The Samajwadi Party, whose support appears crucial for the survival of the government, said on Tuesday it would not be "rigid" on economic issues but wants a mechanism through which it can influence policy making.

The party has stepped in to fill the void left by communist allies of the Congress party-led ruling coalition, who finally walked away angry over the government's decision to forge ahead with a nuclear energy deal with the United States.

In an interview with Reuters at his south Delhi home, the party's general secretary, Amar Singh, a key intermediary in negotiating the alliance, rejected accusations his party was seeking the removal of key cabinet ministers.

But Singh, whose powerbase lies in the unruly politics of India's largest and poorest state, has a range of economic issues on which he and his party want the government to act, and he clearly wants to be widely consulted.

"We have not given unconditional support, we are not likely to give it either. It is issue-based, outside support; we are not joining the government. So I will expect issues to be resolved before they are taken up," Singh said.

"I will talk to (Prime Minister) Manmohan Singh and (Congress party head) Sonia Gandhi that one mechanism should be there, but what formal shape it should take, I am not in a position to articulate right now."

Local media reports have speculated the SP would seek the sacking of Finance Minister Palaniappan Chidambaram, Oil Minister Murli Deora and Reserve Bank of India (RBI) Governor Y.V. Reddy in return for its support, and the party has criticised the government's handling of spiralling inflation.

The communists, who provided the government with a majority in parliament for the past four years, used their muscle to block reforms to further open the economy.