India is passing through a dystopian nightmare. The scene is as gloomy as it can possibly be. High inflation, low investment, falling growth rate and a widening gap between the rich and the poor, as testified by the Organization for Economic Cooperation and Development (OECD), have been compounded by the government's policy paralysis which has been diagnosed by an unnamed Congress minister as a symptom of Parkinson's disease.

What has deepened the murkiness is the government's ignominious retreat on permitting foreign direct investment (FDI) in the multi-brand retail sector under pressure from an opportunistic opposition and shortsighted allies. The backtracking appeared to be even more unfortunate since FDI in retail was heralded as the beginning of the long-delayed big ticket reforms.

It was welcomed because the bold initiative followed a long period of official inaction in the wake of numerous corruption scandals. The government was seen, therefore, to have finally shed its lethargy and decided to inaugurate the second generation reforms, which had been held up since its first term (2004-09) because of the Left's obstructionism.

Now, all these hopes have turned to dust. What is even more worrisome is that it isn't only the FDI in retail which has been kept on hold, but the possibility of the entire 20-year-old reform process being derailed. The reason for the fear is that the opposition parties and intransigent allies like Mamata Banerjee have smelt blood. They have realised that if they stand firm, the government will retreat.

Moreover, it can be expected to do so because it does not have either the courage of conviction to stand by its decision or to call the bluff of the opponents by ignoring their threats and implementing the decision. The government's succumbing to the pressure is strange because both the Trinamool Congress and the DMK had let it be known that they would not vote against the government if there was an adjournment motion on the FDI issue in parliament.

There must have been a deeper reason, therefore, for the government's withdrawal from the battlefield. And, it is undoubtedly related to the by now well known differences between the "neo-liberal" Manmohan Singh and the "left-of-centre" Sonia Gandhi. Her studied silence on the subject of FDI during a Youth Congress rally the day after the decision was announced was the first indication that the prime minister and the Congress president were not on the same page on the subject.

This divergence of opinion was not surprising considering that they had differed on a host of other topics such as the nuclear deal, on which she had said that the Left had a point in its objections, on the rural employment and food security schemes because of the huge expenditure and high possibility of leakage, and on including caste in the census enumerations because it would give a fresh lease of life to caste-based politics.

The latest difference, however, can have portentous consequences, for it can permanently stall the reforms process for two reasons. First, since there is little likelihood of the government acquiring a majority in parliament in the near future, it will continue to be at the mercy of an unscrupulous opposition and stubborn and short-sighted allies. Secondly, there is no unanimity in the Congress about the reforms, which have always had detractors in the party belonging to the camp of Nehruvian socialism.

It has to be remembered that the Congress declared the establishment of a "socialistic pattern of society" as its goal in 1955 and had the word 'socialism' incorporated in the constitution in Indira Gandhi's time. It is not beyond the realms of possibility, therefore, that influential sections in the Congress secretly cherish a return to the days of a controlled economy. They still apparently believe that the restoration of socialistic principles is what the poor want because of their distrust for the private sector in general and the multinationals in particular.

But, if the Congress is unable to make up its mind about an open or a closed economy, the opposition is concerned solely with ways to embarrass the ruling coalition irrespective of the merits or demerits of the case. Both the Bharatiya Janata Party (BJP) and the Left - the communalists and the communists - are united on this approach except for the fact that while the comrades are guided by their anti-American worldview, the BJP, which has no such angularities, is interested only in making trouble for the Congress.

Unlike the BJP, the allies of the Congress like the Trinamool Congress and the DMK may not want to corner the Congress, but their restricted outlook, confined only to their respective states, makes them impervious to the intricacies and usefulness of economic measures at the national level. In this particular case, the Trinamool's fear was that support for FDI would have exposed it to the Left's charge of being anti-people and pro-capitalist in West Bengal. It is a pity that partisan politics sabotaged good economics.

* Amulya Ganguli is a political analyst. He can be reached at amulyaganguli@gmail.com
* The views expressed by the author in this feature are entirely his/her own and do not necessarily reflect the views of SME Times.