Post-Mamata Banerjee, government says it will focus on less-controversial reforms

New Delhi: Tonight at 8, the PM will explain on television the economic measures for which he has staked his government, which is now in a minority.  Sources say he will point out that the reforms are crucial to jumpstart the economy and to create employment.  "Lots of distortion is going on...some misinformation campaign is going on," said V Narayanasamy, Minister of State in the Prime Minister's Office, explaining the Prime Minister's decision to address the nation.

But Mr Narayanasamy conceded that introducing more big-bang reforms, an initiative the PM is keen on,  will be challenging now that his government's survival  rests upon regional heavyweights  Mulayam Singh Yadav and Mayawati, who are both opposed to his decision to open up the country's vast retail sector to foreign super-chains like Wal-Mart.  "We have to see which are the reforms which we can implement without much difficulty," Mr Narayanasamy admitted, "we will consult our allies and take them on board."   

Mr Yadav's party was voted into power in Uttar Pradesh earlier this year, a victory powered by his son, Akhilesh, who is now chief minister.  Mr Yadav's support at the centre will come with strings attached - his son's government has been soliciting large financial packages and concessions from the UPA. Mr Yadav's stand on reforms will also be guided by his state's votebank, which his likely to pit him against the centre.

Shaking off months of inertia, the Prime Minister decided last week in consultation with party president Sonia Gandhi to combat parlous allies and plough ahead with much-needed economic measures.   So fuel subsidies were reduced; diesel prices were hiked; the supply of subsidised cooking gas to households was capped.  A day later, came the surprise announcement that 51% Foreign Direct Investment or FDI in retail would be effective immediately.   Trinamool Congress chief Mamata Banerjee, whose party was the second-largest constituent of the ruling coalition, said she would not accept these "anti-people" policies.  Her six ministers resigned this afternoon and then met the President and formally withdrew their party's support. "We have no regrets...don't I look more jovial?" asked one of them, Sudip Bandhopadhyay.

The Prime Minister is reportedly keen on increasing the Foreign Direct Investment or FDI in insurance and pension schemes to 49% from the existing 26%.  The change has to be cleared by parliament and the Left and other parties have already opposed the move.

The PM, Congress president Sonia Gandhi and other senior leaders of the Congress will meet this evening to discuss their strategy. There is no immediate threat to the UPA, because Mr Yadav and Mayawati lend the support of 43 MPs to the government, ensuring it has more than the 272 votes it needs to remain in power.  Because of that, the Prime Minister does not need to take a vote of confidence, said Parliamentary Affairs Minister Pawan Kumar Bansal. (Interactive: Help Congress find the numbers)

Since Ms Banerjee announced her decision to drop out of the government earlier this week, Mr Yadav had hinted but not committed that his support to the government will continue.

Today, he ended the suspense for the Congress by announcing that he will stand by the coalition while opposing reforms like FDI in retail.  He also said that his allegiance with the UPA is prompted by his commitment to keeping the "communal forces" of the BJP at bay.

Sources say that to appease Mr  Yadav and Mayawati, the government is likely to announce a 50 paise rollback in diesel prices, and increase the quota of subsidised cooking gas cylinders per household from six to nine.