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Singh Overhauls Cabinet Amid Push to Bolster Indian Economy

Indian Prime Minister Manmohan Singh overhauled his cabinet six weeks after unveiling the biggest policy changes in a decade as he bids to invigorate an embattled minority government in what may be his last reshuffle ahead of elections due within 18 months.

Seven cabinet ministers and 15 junior ministers were sworn in by President Pranab Mukherjee at a ceremony in the colonial- era president’s palace in central New Delhi yesterday. Salman Khurshid, 59, was named foreign minister after S.M. Krishna, 80, resigned from the post ahead of the reshuffle. Rahul Gandhi, the scion of three Indian prime ministers who is expected to take on a more senior party role, was not among those drafted into Singh’s team of ministers.

Ashwani Kumar was elevated to cabinet rank and given the law and justice portfolio. Ajay Maken was also promoted as minister for housing & urban poverty alleviation. Shashi Tharoor, 56, who quit as junior minister in April 2010 amid allegations that he influenced the award of a cricket franchise to his benefit was re-inducted.

“The prime minister is organizing the team that will take him into the next elections,” said N. Bhaskara Rao, chairman of the New Delhi-based Centre for Media Studies. “He has taken a young and fresh set of faces that will be able to inject some energy into the cabinet.”

Ally Quits

After two years, during which corruption charges and opposition within the ruling alliance paralyzed policy making and stripped away voter support, Singh and his finance minister, Palaniappan Chidambaram, have rolled out a string of policy changes in a bid to restore credibility. The overhaul led to the government’s largest coalition ally quitting, an exit that has left Singh dependent on the whim of regional parties to pass legislation in parliament.

Subsidies on diesel have been cut and overseas supermarket chains allowed to open stores. Investment regimes for power markets and broadcasting were eased. Foreign airlines can now own minority stakes in local carriers, and the government has accelerated a plan to sell shares in state-owned companies and lowered the tax paid by Indian businesses that borrow abroad.

Two-thirds of the way through its second term, the Congress party is trying to reverse declining support. Opinion polls show Congress may lose power to a coalition led by the Bharatiya Janata Party, the main federal opposition. A BJP-led group may win as many as 205 seats, while Singh’s coalition may win 78 fewer seats than the 259 it secured in May 2009, a poll carried out by Nielsen and India Today forecast in August.

Election Rout

Congress, after a campaign led by Rahul Gandhi, was routed in assembly elections in the country’s most populous province this year, coming fourth and losing seats in Gandhi family bastions. In the first test of its popularity since announcing the economic overhaul, Congress will seek to wrest power from its main rival in two provincial elections in the states of Gujarat and Himachal Pradesh before the end of the year.

Ratcheting up the pressure on the government, the opposition BJP is leading the charge against the plans to allow foreign companies to open supermarkets, a policy it proposed when in office. With opposition parties threatening to bring a no confidence vote, Singh is maneuvering to shore up its support from smaller regional parties for a majority in parliament.

‘Underachiever’ Singh

Veerappa Moily, 72, was given charge of the petroleum ministry, while S. Jaipal Reddy, who held the portfolio previously, was named minister for science and technology and earth sciences. Jyotiraditya Scindia, 41, was named power minister.

Mulayam Singh Yadav, the leader of the Samajwadi Party, the third-largest party in Parliament, has signaled his support to the government, while saying he will continue to oppose the retail policy. Others unwilling to face the electorate in the next few months may also bail Singh out in the legislature.

The Congress party, which won its biggest election victory in two decades in May 2009, has had to fight off an opposition onslaught over alleged corruption that has included the 2010 hosting of the Commonwealth Games, a sale of mobile-phone licenses in 2008 and now a scandal over coal-block allocations. Street protests, strikes and public fasts have combined to dent Singh’s reputation as an able administrator.

Singh has been labeled India’s “weakest ever” prime minster by opposition leader L.K. Advani, while Time magazine July 16 branded him an “underachiever” on its cover.

To contact the reporters on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net; Andrew MacAskill in New Delhi at amacaskill@bloomberg.net

To contact the editors responsible for this story: Hari Govind at hgovind@bloomberg.net; Peter Hirschberg at phirschberg@bloomberg.net

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