By Bappa Majumdar and C.J. Kuncheria
NEW DELHI (Reuters) - India's Congress-led government sailed through a trial of strength in parliament on Tuesday, with smaller parties giving it a leg up to achieve a surprisingly strong victory despite a recent string of troubles.
Prime Minister Manmohan Singh's government was backed by 289 lawmakers in the 545-strong lower house, while the opposition managed 201 votes against. Two parties walked out on the vote, adding to abstentions.
Despite the handsome win, Singh and his reformist aides are not likely to move on major reforms to open up the economy, seen needed to sustain double-digit growth rates like in peer China.
The vote was demanded by opposition parties against an unpopular hike in fuel and fertiliser prices which they said stoked inflation and hurt the poor, but which the government say is needed to cut the fiscal deficit from a 16-year high of 6.9 percent of GDP.
"Certainly it has strengthened the government's hand, but I don't necessarily think it is a sort of push forward for reforms. There are a lot of other issues it needs to address," Abheek Barua, chief economist at HDFC Bank, said.
Most of the coalition's wavering allies and other small parties lined up behind the Congress as they feared a no-vote would strengthen the main opposition Hindu-nationalist Bharatiya Janata Party (BJP).
Financial markets had largely ignored the parliamentary row, correctly anticipating no threat to the government.
Apart from reluctant allies, there is resistance to reforms from the socialist Congress old guard, who remain suspicious of the impact of liberalisation on their rural and poor voters.
"Inflation is an issue which has worried even the Congress, specially several state governments, and they still have to deal with it and some truant allies," N.R. Bhanumurthy, professor at think-tank National Institute of Public Finance and Policy.
Political misgivings had forced the government in March to defer a bill to cap liability in case of a nuclear accident, crucial for firms like General Electric and Westinghouse Electric to enter India's $150 billion civil nuclear sector.
Other long-pending bills include those to allow greater foreign stakes in pension and insurance, or to permit foreign universities to set up local campuses.
Government officials and analysts say these changes are needed for India to overhaul its creaky infrastructure and increase its trained workforce, key to accelerate growth.
CONGRESS SPRINGS BACK
In the run-up to the vote, barely a year after Congress returned to power with a stronger mandate, the coalition had appeared wobbly, lurching from one predicament to another.
Two allies pulled out over a bill to reserve legislative seats for women and others expressed disquiet over issues ranging from high prices to a cricketing scandal.
The tide turned in Congress' favour when Mayawati, the chief of the Bahujan Samaj Party of lower castes, decided to cast her lot with the government despite misgivings over its policies.
The anti-government alliance's numbers were further thinned when two former allies walked out of parliament after a verbal spat with the main opposition Bharatiya Janata Party.
Few parties, including the BJP and the communists, want an election now, and had said the vote was to force the government roll back the decision to hike prices of petrol, diesel and urea.
Outside parliament, the communists and their allies shut down shops, offices, trains and airports in several states as they enforced a dawn-to-dusk strike protesting inflation that is running at a 17-month high of 9.9 percent.
The demand for Tuesday's vote was sparked by a decision in February to raise subsidised petrol prices by 6 percent and diesel by 7.75 percent, and to let firms set prices of most fertilisers, moves to help improve state finances.
(Additional reporting by Nigam Prusty; Editing by Jeremy Laurence)
