NEW DELHI, AUG. 2 -- A raucous political fight here this summer has culminated in the ouster of a powerful Indian politician who strongly opposed recent moves to liberalize the country's socialist economy and encourage greater investment from the West.

The dismissal, announced early this morning, of Deputy Prime Minister Devi Lal, the number two leader in the Indian government, is likely to boost the fortunes of urban politicians in the country's fractious governing coalition who have urged that India join the international rush toward free market economies.

Lal, a populist rural leader, was ousted from his cabinet post by Prime Minister Vishwanath Pratap Singh following a series of disputes over power and policy. Singh apparently decided to force the issue after Lal, in a published interview, called the prime minister spineless and denounced his foreign minister as "a wimp."

The dismissal is likely to provide at least a short-term lift to Singh's National Front government, which depends on parliamentary support from Communists and Hindu conservatives. Bickering generated by the dismissed deputy prime minister's political tactics and staunch support for rural socialism had contributed to growing paralysis within Singh's nine-month-old administration.

Citing Lal's brash words and his use of a forged document in an attempt to publicly discredit his urban-based opponents in the cabinet, Singh told Lal in a letter, "you have brought things to this pass {through} violation of all canons of collective responsibility of the cabinet."

Lal's squabbles with fellow cabinet members often concerned personalities and power, but behind them lay seemingly intractable disagreements about what direction the country should take in the aftermath of upheavals in Eastern Europe and the Soviet Union, an important ally.

The most divisive debate concerned whether and how fast India should move away from the mixed socialist, centrally planned economic policies it has pursued with little interruption since independence in 1947.

A landlord and rural politician with a high school education, Lal rose to prominence by voicing the grievances of a populous caste of northern peasant farmers who benefit from the massive agricultural subsidies that have been a staple of India's central budgets.

Faced with a huge internal budget deficit and a rising external debt, as well as international pressures on India to open up its protected markets, some Indian leaders have been urging a sharp cut in rural subsidies and an accelerated shift toward a free-market economy. But such moves have been slowed by the powerful rural lobby headed by Lal and his allies.

Although he has pushed economic liberalization in the past, Singh has avoided taking any bold stand on the issue since assuming office.

In an interview published this week, Singh defended his approach as fundamentally democratic, but said the Lal episode had taught him that he must assert himself more in the future. "I have learned a lesson," he said. "I think I have to be more firm."