Despite having progressive and reform-oriented Palaniappan Chidambaram at the helm of the Ministry of Finance, the Congress Party seems to have bowed to pressure from India's leftists, who fear that disinvestments would lead to huge job losses in the public sector.
The Left Front had also opposed raising the 26 per cent foreign investment cap in private insurance companies, fearing that more competition could erode the strength of state-run firms, leading to job cuts. The leftists' grip on decision-making was evident when an amendment to a banking reform bill that sought to reduce the government's stake in state-run banks to 33 per cent from 51 per cent was dropped hours after the decision to postpone the divestments was made.
'What we have is a diarchy in which the power lies with the left and responsibility lies with the Congress government,' said Prem Shankar Jha, a columnist for Outlook magazine.'