Latest update: 05/07/2010
Nationwide strike over fuel prices causes travel chaos
A nationwide strike called by India's opposition parties over a hike in fuel prices has disrupted road, rail and air travel Monday, with opposition workers setting buses on fire and burning tyres.
By News Wires (text)
REUTERS - Opposition workers set buses on fire and hurled stones as a nationwide strike over higher fuel prices shut down parts of India on Monday in a test of the government's efforts to cut subsidies and trim a budget deficit.
The response to the strike, the biggest by the opposition in recent years, was mixed and analysts said the government was unlikely to back down on an issue central to its fiscal policy.
There was a total shutdown in opposition-ruled states. However, business was mostly normal in regions ruled by the Congress party that also heads the central government.
Many flights were cancelled and streets emptied in response to the strike called by the main opposition Hindu-nationalist Bharatiya Janata Party (BJP) and the leftist bloc as the Congress party tries to push key reforms in Asia's third-largest economy.
Police briefly detained thousands of protesters across the country to break up the demonstrations, some of which were unexpectedly large and violent with crowds jostling with police or trying to stop traffic with burning tyres.
The government is expected to stick to its decision, encouraged by tacit support from parliamentary allies and the fact the strike was successful only in opposition strongholds.
"This is a case where the opposition has come together on an immediate issue, but it doesn't mean this will bring pressure on the government to rollback the hike in petrol prices," said D.H. Pai Panandikar, head of private think tank RPG Foundation.
"The need for fiscal prudence is far greater than populism and the government understands that."
Higher fuel prices will add nearly one percentage point to headline inflation, which at 10.16 percent now could result in voter backlash against the Congress party in several key state elections over the coming months.
The government retained power last year largely on a social spending agenda but says it must curb costly subsidies to stay on target to cut the fiscal deficit to 5.5 percent in 2010/11.
Fuel subsidies in the year ending March 2010 were roughly 1 percent of GDP.
On Monday, most of India's biggest businesses in financial capital Mumbai remained shut, though stock and bond markets were open. At the IT-hub of Bangalore in BJP-ruled Karnataka state, almost all major software firms closed.
Most coal and iron ore mines and ports in eastern India functioned as usual, apart from some disruptions in ore transport in Orissa state, officials said. Several key spot markets for commodities were closed.
In eastern West Bengal state, a communist bastion, supporters took to the streets waving red flags. In Congress-ruled capital New Delhi, the underground train service was briefly disrupted.
One industry lobby put the cost of the strike at more than $640 million in lost business across India.
Signalling the government's resolve, Finance Minister Pranab Mukherjee said there was no question of reversing the price hike which on Friday helped prompt the central bank to raise interest rates by 25 basis points, nearly a month ahead of a scheduled policy review.
With an eye on elections in the coming months, the Congress party's allies will publicly complain about inflation but analysts said they still support the measures.
However, they are are likely to be less supportive of more painful reforms that Prime Minister Manmohan Singh wants to push through, such as opening up insurance and banking to foreign investors, and which could face strong opposition in the next parliamentary session starting on July 26.