Indian finance chief pressed to resign

MANMOHAN SINGH, architect of India's current economic reforms, is under pressure to resign after a parliamentary inquiry yesterday blamed his Finance Ministry for failing to detect a pounds 790m banking and securities fraud.

The Joint Parliamentary Committee did not name Mr Singh, but MPs from the three leading opposition parties today are expected to demand that the Prime Minister sack his Finance Minister and several other senior cabinet officials. This follows their alleged involvement in the far-reaching scam, in which several foreign banks, Bombay stockbrokers and senior government departments were all implicated.

MPs from the Bharatiya Janata Party, the left-wing Janata Dal and the Communist Party are pressing for a fresh investigation into a reported pay-off of pounds 217,000 allegedly made by Harshad Mehta, a key stockbroker in the scam, to the Prime Minister, Narasimha Rao, who denies receiving the money.

Privately, many MPs doubt that Mr Singh, an internationally renowned economist with a reputation for integrity, profited personally from the fraud which, when exposed in spring 1992, sent the Bombay stock market into a crash and led to the bankruptcy of several Indian banks and financial institutions. The 130-page parliamentary report blamed the Finance Ministry for failing to 'anticipate' the colossal fraud and for not 'punishing the guilty in time and resolutely'.

If Mr Singh resigned, it would derail the government's economic reforms, the most radical of their kind since India gained independence in 1947. Under the Western- influenced Finance Minister, India discarded state socialism, similar to the old Soviet model, and opened its markets to foreign companies. It is more probable that, if pressed, the Prime Minister would sacrifice his Railway Minister, his Petroleum Minister or his Reserve Bank Governor rather than Mr Singh.

The parliamentary inquiry also censures foreign banks, such as Standard Chartered, ANZ Grindlays, Citibank and several others, for their alleged role in the fraud.

The report y the 30-member committee claims that money given to government ministers for hydro-electric dams, irrigation canals and other development projects was instead siphoned off to manipulate share prices.

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