India's cornered PM vows to press on despite scandals

Reuters , Wednesday 16 Feb 2011

Singh vowed on Wednesday to stay in office to press ahead with reforms, denying a series of massive corruption scandals had made him a lame duck leader

Indian Prime Minister Manmohan Singh defending his embattled government against a string of corruption scandals in a meeting in New Delhi

Allegations the government may have lost up to $39 billion in revenue after firms were awarded telecoms deals at rock-bottom prices in return for kickbacks have caused months of parliamentary paralysis, rocked the ruling coalition and rattled India's markets.

"Whatever some people may say, that we are a lame duck government, that I am a lame duck prime minister, we take our job very seriously," an often frail-looking Indian Prime Minister Manmohan Singh, 78, said in a rare media roundtable with TV editors to improve his worsening image.

"We are here to govern, and to govern effectively. Tackle the problems as they arise and get this country moving forward."

That Singh was forced to deny talk of resignation underscored both the gravity of the scandals and how Singh's decision-making has been paralysed in his second term despite being re-elected in 2009 with an increased majority.

The last parliamentary session was halted by opposition protests demanding a probe into the telecoms scam, effectively stopping any reform bills such as one to make land acquisition easier for both industry and farmers.

"Things are not entirely the way I would like them to be but quite frankly I never felt like resigning because I have a job to do," Singh said in comments broadcast live.

His appearance received sceptical reaction, with some commentators saying he failed to convince. Nitin Gadkari, president of the opposition Bharatiya Janata Party (BJP), saying his statements were a "cover-up".

Indian stocks are down nearly 11 percent this year, the worst performers among major Asian markets, with worries about corruption scandals keeping investors on edge.

Foreign investors have pulled hundreds of millions of dollars from the Indian stock market since the start of the year, while foreign direct investment (FDI) has fallen for three consecutive years, from 2.9 percent of GDP in 2008/09 to around 1.8 percent of GDP in 2010/11.

Some of this is connected with the global economic slowdown, but regulatory uncertainty may also be a factor.

"This sort of atmosphere is not good. It saps our own self-confidence. It also spoils the image of India," Singh said over the corruption scams, but he denied they had hurt FDI.

For more than an hour, editors peppered Singh with questions about why he had failed to act on graft cases, alleged corrupt ministers and why probes had taken so long.

On each question, Singh, looking defensive and rattled, denied wrongdoing, and often referred to a prepared written statement. Sometimes he blamed coalition politics for the lack of quick decisions.

Singh's stumbling has prompted some commentators to predict a repeat of 1989, when Congress lost a general election due to the Bofors scandal. That centred on gun contracts involving close associates of then Prime Minister Rajiv Gandhi who were accused of taking bribes.

The next general election is still three years away and Singh has opportunities to regain the initiative, whether through spending on social welfare programmes or doing better than expected in state elections.

But Singh has always been hampered by the image of playing second fiddle to Congress Party head Sonia Gandhi, and, as a figurehead leader, exercising little real power.

In Wednesday's broadcast, Singh at times gave the impression of indecision, such as when he was asked why he did not act quickly over problems in the allocation of telecom licenses between 2007 and 2008. "Although complaints were coming in, although complaints were coming from all sides, some from companies not benefiting (from the telecoms spectrum allocation) ... I was not in a position to make up my mind that anything seriously was wrong," Singh said.

Singh's government now appears close to agreeing to a broad, cross-party investigation into the scandal, paving the way for parliament to resume as normal for a Feb. 21 budget session, and Singh said he would press ahead with reforms.

"We have not given up, we will persist (on reforms). There are difficulties, particularly when government is not allowed to function."

In one sign the prime minister may attempt to refresh the image of his government, Singh said there would be another cabinet reshuffle after the budget session. The first reshuffle of his second term in January was widely criticised as cosmetic.

"We have important legislation, apart from the budget, to put before parliament," Singh said. "And talks are going on with the opposition parties to ensure that whatever our differences, parliament should be able to function normally."

The scandals have taken a heavy toll on Singh, who is concerned his legacy is shifting from that of a founder of India's economic boom, to someone who did nothing to stop corruption or policy paralysis.

"Today is not enough. It needs to be followed up with several more steps. Hopefully the next one will be a JPC (the parliamentary probe)," said Andrew Holland, CEO of Equities at Ambit Capital in Mumbai.
"Companies outside India who are looking to investing would be looking at these issues closely ... Investments have slowed since November, especially in infrastructure contracts."

Singh may have hoped the current scandals would ebb. But an aggressive media, an assertive Supreme Court and an opposition tasting political blood have seen momentum into the corruption probes expand.

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