Mercurial Leader Withdraws Support From Governing Coalition

NEW DELHI - 's national government was plunged into turmoil on Tuesday night, facing an uncertain future after a crucial regional ally threatened to withdraw her support from the governing coalition to protest a package of fuel price increases and pro-business economic changes.

Mamata Banerjee, the populist chief minister of the state of West Bengal, announced on national television that her party would formally leave the government on Friday - a 72-hour delay that most analysts interpreted as a tactic to leave open a window for further negotiations. A government spokesman signaled a willingness to renew talks, though it was unclear if the government was prepared to roll back any of the new economic measures, including those that would allow multinational giants like Walmart and Ikea to build major retail outlets in India.

The governing United Progressive Alliance would lose its narrow majority in Parliament if Ms. Banerjee withdrew her 19 lawmakers from the coalition, raising the possibility that the government could collapse, forcing early elections. Other regional parties, however, have signaled a willingness to extend “outside” support to the government, meaning that the United Progressive Alliance could survive as a minority government.

Ms. Banerjee, in a fiery address, accused the government of “selling the country” as a result of the policy changes last week, which raised the price of diesel fuel and allowed greater foreign investment in retailing and aviation. Ms. Banerjee has characterized the moves as against the poor, though many economists and business leaders say they are critical measures that will attract investment and help address the country's fiscal deficit.

Sandeep Dikshit, a spokesman for the Indian National Congress Party, which leads the coalition government, said that “it saddens us losing an important ally,” even as he defended the government's economic moves last week.

“I think this is the beginning of the reform process,” Mr. Dikshit said in a televised interview. “I think it has been kick-started. I think we'll surprise everyone by the decisions we take, the actions we take and the stability of the government.”

Opposition leaders, on the other hand, pounced on Ms. Banerjee's decision to portray the government as floundering and facing its final days.

“This whole U.P.A. alliance is full of instability and contradictions,” said Ravi Shankar Prasad, chief spokesman for the opposition Bharatiya Janata Party. “The government has become inherently unstable.”

Whatever happens in the next few days, Ms. Banerjee has once again ensured that she is the focus of much of the nation's attention. Last year, Ms. Banerjee blocked an earlier attempt by Prime Minister Manmohan Singh to push through measures allowing foreign retailers to enter India in a big way when she threatened to bring down the government. This time, Mr. Singh and other leaders, trying to recover from corruption scandals and other mistakes, decided to push ahead, vowing not to roll back the policy changes.

In recent days, analysts predicted that Ms. Banerjee would probably have a tactical response, by withdrawing her party's ministers from the government as a gesture of protest, while maintaining her party's presence in the governing coalition. Her state government in West Bengal is facing a huge budget shortfall, and political experts say Ms. Banerjee is trying to negotiate favorable terms for money from the central government.

Three days ago, she set the Tuesday deadline for her decision, and then, after a closed three-hour meeting with leaders of her party, she held her announcement until around 8 p.m. - the heart of prime-time television viewing.

India's next national elections are scheduled for 2014, but many analysts are now predicting earlier elections. Regional leaders like Ms. Banerjee and Mulayam Singh Yadav, leader of the Samajwadi Party, have told their supporters that early elections could offer an opportunity to pick up additional seats in Parliament, increasing their national clout. Yet Indian politics are notoriously volatile, and most analysts say regional leaders will most likely wait until next year before forcing elections.

For the moment, the question is whether Congress Party leaders can reach a deal with Ms. Banerjee. Some political analysts have speculated that the government might be able to win her support by lowering the price of diesel or by allowing a few more subsidized purchases of cooking gas canisters. Her allies, though, said she was taking a principled stand to protect poor people and would never accept the widespread entrance of foreign retailers, a move she sees as a threat to small shop owners.

“I think she has taken a moral position,” said Amit Mitra, who serves as Ms. Banerjee's finance minister in West Bengal. Mr. Mitra said her decision was also rooted in her disgust with the corruption scandals rocking the United Progressive Alliance government, including the recent controversy over allocations of fields to political cronies.

But others suggested that Ms. Banerjee might still strike a deal, despite her tough tone on Tuesday.

“I'm not sure that we've heard the last word, but we've certainly heard a very strong word,” Mani Shankar Aiyar, a Congress Party stalwart and a member of the upper house of Parliament, said on CNN-IBN, a news channel. “The ball now has been put firmly in the court of the U.P.A. government. Let's see what the U.P.A. government is going to do.”