CORRECTED-Strike by Indian unions over prices hits transport, banking

Wed Feb 20, 2013 3:03am EST

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(Corrects word in fifth paragraph to downgrade, not upgrade)

NEW DELHI Feb 20 (Reuters) - Many Indian banks were closed and public transport disrupted on Wednesday because of a strike by trade unions protesting against high prices but the capital, New Delhi, and business centre, Mumbai, were mostly unaffected and financial markets were open.

Violence erupted in some places on the first day of a two-day strike as workers, angry about high fuel prices in particular, tried to keep vehicles off the roads. One union member was killed in the northern city of Ambala, media said.

The strike comes as the beleaguered government prepares to present an austerity budget to parliament and as it weathers a corruption scandal in a big arms deal.

Parliament begins its budget session on Thursday and the government is to present its expenditure plan for fiscal 2013/14 (April-March) next week.

Several officials have told Reuters the government will slash a public spending target by up to 10 percent to avoid a sovereign credit downgrade, even though that will not go down well in a high inflation environment.

The government is also on the back foot over accusations by Italian police that officials from defence group Finmeccanica paid bribes in a $750 million deal to sell India VIP helicopters manufactured by its Anglo-Italian subsidiary AgustaWestland.

Prime Minister Manmohan Singh, who is grappling with the worst economic slowdown in a decade and faces a general election early next year, had asked the unions to call off the strike, but they refused.

"We want the government to take note of this," said Akhtar Hussain, vice-president of the Bharatiya Mazdoor Sangh, or Indian Workers' Union. "They think they can turn a blind eye to our demands, but they must know that enough is enough. We need our demands to be met. The government needs to be more serious."

In New Delhi and Mumbai, bus and suburban train services were running without disruption. Some taxis were off the roads but offices and schools were open.

Elsewhere, however, public transport was not running, banks were closed and most shops and offices kept their shutters down.

In Bhubaneswar, the capital of Odisha state in the east, protesters set fire to effigies of Singh and ruling Congress party leader Sonia Gandhi. Several trains were stranded at stations as protesters blocked railway tracks.

In the western state of Gujarat, close to 8,000 state-owned buses were off the roads, officials said. Banking services were also disrupted as thousands of bank employees joined the strike.

The Associated Chambers of Commerce and Industry said on Tuesday that the two-day strike was expected to cause an estimated loss of 150 billion-200 billion rupees ($2.8 billion-$3.8 billion), hurting sectors such as banking, insurance and transport. (Reporting by Annie Banerji in NEW DELHI, D. Jose in THIRUVANANTHAPURAM and Jatindra Dash in BHUBANESHWAR; Writing by Arup Roychoudhury; Editing by Raju Gopalakrishnan and Robert Birsel)

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