India's crisis within a crisis: FM Chidambaram fights on two fronts

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P Chidambaram has been grappling with the economic emergency since he became Finance Minister for a third time 13 months ago. P Chidambaram has been grappling with the economic emergency since he became Finance Minister for a third time 13 months ago.
SummaryFM must stop investors heading for the hills as growth skids to its slowest pace in a decade.

Late last month, with their doors shut to the mounting market panic outside as investors fled the country, India's cabinet ministers gathered to give final approval to a cheap food scheme for the poor.

It was hardly a difficult decision for a government that needs to shore up its sagging popularity before elections due by next May. But officials familiar with the discussion say there was one dissenting voice over what is now destined to become one of the world's largest welfare programmes.

Finance Minister P. Chidambaram, already struggling to convince doubters that he will keep the country's hefty fiscal deficit under control, made a last-minute attempt to trim the huge cost of the plan, estimated at about $20 billion a year.

Chidambaram's ultimate failure to win colleagues around - despite his famed eloquence - is emblematic of the predicament he faces: he must stop investors heading for the hills as economic growth skids to its slowest pace in a decade, but he is surrounded by politicians who haven't grasped that there is a crisis at hand and want to spend their way to the ballot box.

In many ways, Chidambaram has been grappling virtually alone with the economic emergency since he became finance minister for a third time 13 months ago.

Cabinet colleagues, wayward allies of the UPA and an obstructive opposition have together stood in the way of bold steps that might have averted this year's collapse of confidence in the India story.

It is a crisis within a crisis.

With elections looming, that won't change anytime soon, which means Chidambaram will find it difficult to take robust policy action if the situation goes from very bad to worse.

"If parliament is not able to point to the direction in which the country's economy will go, parliament is not able to agree on, say 10 steps which the government should take today ... what kind of a message will it send to the rest of the world?" he asked members of parliament (MPs) in frustration last week as the rupee tumbled ever-lower into uncharted territory.

"The fact is, the polity of this country is divided on economic policies and that is understandable ... My plea to everyone, despite our differences: can we agree upon some measures which have to be taken in order to lift the country's economy from what it is today?" he said.

Chidambaram was not available for an interview for this story.

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