But they said Singh continued to sidestep some of the fundamental issues that have plagued his government, including the corruption and lack of transparency in decision-making that business leaders say is holding back investment and growth.
“I promise you that I will do everything necessary to put our country back on the path of high and inclusive growth, but I need your support,” Singh said, hours after one of his coalition partners formally withdrew from the government to protest last week’s decision to allow in foreign supermarket chains such as Wal-Mart and Tesco and reduce subsidies on diesel.
“We have much to do to protect the interests of our nation, and we must do it now,” Singh said. “The time has come for tough decisions.”
On Thursday, many of the nation’s small shopkeepers closed their stores and thousands took to the streets, arguing that the arrival of foreign retailers would put them out of business.
But Singh said those fears were “completely baseless.” Other sectors of the economy, from information technology to steel and the auto industry, have thrived when exposed to foreign competition and investment, and he said retail trade would, too.
With growth slowing, government borrowing rising and investor confidence slipping away, officials say India’s government was compelled to act last week to ward off the possibility of a downgrade in its debt rating to junk bond status, with potentially disastrous implications for the rupee and borrowing costs.
Business leaders said last week’s policy announcements, which included allowing limited foreign investment in the airline industry, were welcomed as a step in the right direction — a mood-changer but not yet a game-changer — in a country where red tape, corruption, woeful power supplies and problems in acquiring land act as powerful deterrents to investment.
“He didn’t talk about any of the things that have been consuming the country in the past few months,” said Manisha Priyam, associate professor of politics at Delhi University and a research scholar at the London School of Economics. “He didn’t address issues of transparency, allocation of national resources or any of the domestic reforms that everybody is demanding. Does he not have anything to say on that?”
Nevertheless, the decision to open up the retail market, something the U.S. government has long lobbied for, was a significant political risk for Singh. The government had already backed down from that decision after similar opposition last year.
‘Where is the big picture?’
This time around, Singh’s Congress party says it has enough support from other smaller, regional- and caste-based parties to shore up its coalition and comfortably win any confidence vote in Parliament.