Sonia Gandhi, head of the ruling Congress party and India's most powerful politician, backed the finance minister on Thursday, effectively signalling her support for a move to raise taxes on fuel, lawmakers said.
The budget move to raise fuel prices for the first time since July has met with anger from both the opposition and government allies, underlining the challenge in cutting the fiscal deficit from a 16-year-high of 6.9% of GDP.
Gandhi, widely seen as running the government from behind the scenes, has a history of supporting populist measures, so her stand was being seen as a test of how far the government will push reforms to liberalise state-regulated sectors like fuel.
Gandhi spoke at a meeting of her party lawmakers, seeking to remove resentment among a section of the Congress party worried that a rise in fuel prices would worsen already high inflation and anger millions of voters.
"She congratulated the finance minister (Pranab Mukherjee) on his well-balanced budget and said growth is the engine of the budget," Sandeep Dixit, a Congress lawmaker who attended the party''s closed door meeting, said.
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