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protest on the streets in the form of strikes and in some cases riots; opposition
from rival political parties and from within the Congress party; and disapproval
from powerful industrialists close to the government.
The budget for 1985-86, presented by Finance Minister V.P.Singh, took
several steps to dismantle elements of the centrally planned economy,
particularly in the areas of trade and investment. The proposals included the
removal of licensing requirements for a handful of industries, an increase in
investment limits, reduction in tariff restrictions on some imports, substitution of
tariffs for quantitative restrictions on some goods, and active encouragement of
exports through tax concessions. Without specifying a concrete course of action,
the government also declared the need for public sector reform. Like the 1985-
86 budget, India's Seventh Five-Year Plan, which covered the years 1985-86 to
1989-90, advocated economic liberalization. 14
In early 1986, the government announced plans to reduce subsidies in order to
address fiscal imbalances. The targeted subsidies, which included petroleum,
food, fertilizer, and transport, adversely affected the poor and middle class alike,
and gave Gandhi's political opponents a popular policy platform from which to
criticize the government. The labor strikes and rallies, many of which were
organized by opposition political leaders, had the effect of alarming members of
the Congress party, who joined the opposition in demanding a reduction in
subsidy cuts, a demand with which the government soon complied.
Since the landslide victory in the 1984 elections, in which Congress secured
514 out of 545 seats in the lower house of parliament, the Congress had lost in
elections at the state and local levels. Dissidents within the Congress party
attributed some of these losses to the dissatisfaction of the majority of Indians
with Gandhi's reformist agenda. 15
Opposition to the reform policies spread to rival political parties who spun
Gandhi's pro-reform stance as anti-working class and anti-poor. Not only had the
government enacted tax cuts for business, providing powerful fodder for
Gandhi's opponents, but the economy did not react positively to the
liberalization measures. Inflation remained near 10 per cent and the trade deficit
increased.
In addition to opposition from political leaders and unions, Gandhi's
liberalization program increasingly drew ire from the business community.
While some in the business community approved of the attempts to alleviate
licensing requirements, many others were being hurt by unfamiliar foreign
competition.
The bulk of Gandhi's success with reform came within the first two years of
the regime. Starting in 1986 opposition to reform had magnified enough to make
further changes politically difficult, despite the overwhelming majority of the
Congress government in parliament. Political disturbances in Punjab and
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