> INDIA'S POLITICS
> May 20th 2004
>
> Formed in a shambles, India's new government can only get better
>
> THE comparisons that have been drawn with the Buddha and Mohandas
> Gandhi seem a bit overblown. But India reveres renunciation, and the
> decision by Sonia Gandhi (no relation to the Mahatma) to forgo the
> chance to become India's prime minister has mightily enhanced her
> stature. It has probably also been good for her party, Congress, and
> the prospects of the government it will lead under Manmohan Singh, her
> anointee, who was due to be sworn in on May 22nd.
>
> The party itself found this hard to accept. Its members of parliament
> seemed to think they had wandered into a production of "King Lear", a
> less happy tale of renunciation. In an emotional--nay,
> hysterical--meeting on May 18th they hectored, cajoled and begged Mrs
> Gandhi to change her mind and take the job. The unbridled sycophancy
> was a reminder of the party's feudal attachment to the Nehru-Gandhi
> dynasty, and fear that, without her as a neutral figurehead, its
> kingdom will fall apart.
>
> Mrs Gandhi was swayed neither by them nor by the several hundred
> equally high-pitched party activists gathered outside her front gate,
> some of whom felt genuinely cheated. They had worked hard to help her
> achieve the election result announced on May 13th, bringing a
> Congress-led coalition back to power against all expectations. They had
> rooted for her right to be prime minister despite being born in Italy.
> Some argued, incredibly, that if she was unwilling to serve, then her
> son Rahul, a 33-year-old first-time MP, should step in. Others
> complained she was yielding to a xenophobic campaign that should have
> been confronted.
>
> That may indeed have been one factor in Mrs Gandhi's decision. The
> Bharatiya Janata Party (BJP), the former ruling party, and its
> coalition partners had said they would boycott her swearing-in, though
> the BJP's leader and former prime minister, Atal Behari Vajpayee, would
> attend. One former BJP government minister, Sushma Swaraj, and her
> husband were to resign their seats in the upper house of parliament in
> protest at the "national shame" of installing an Italian-born prime
> minister. Similarly, another senior BJP leader, Uma Bharti, had
> resigned as chief minister of the state of Madhya Pradesh. After Mrs
> Gandhi's sacrifice though, Miss Bharti, a SANYASIN, or religious
> renunciate, looked rather silly.
>
> Other groups linked to the Rashtriya Swayamsevak Sangh (RSS), the
> Hindu-nationalist mass organisation that spawned the BJP, had already
> taken this campaign to the streets. Ram Madhav, an RSS spokesman,
> blamed the BJP's electoral defeat in part on its failure to find "any
> real national-level emotive or ideological issue". There was a risk
> that Mrs Gandhi's Italian origins might fill that void and prove the
> dominant theme of the new government's early days. Rahul Gandhi and his
> sister Priyanka were also said to oppose their mother's taking office,
> fearing for her life, though Rahul denied this. Their father, Mrs
> Gandhi's husband Rajiv, and grandmother, Indira, both former prime
> ministers, were each assassinated.
>
> Mr Madhav claims that even some Congress voters were uneasy about being
> ruled by a native Italian, and he probably has a point. She speaks
> Hindi, wears sarees and says she prefers NAAN to pasta. But her foreign
> birth would always have been a stick to beat her with. Her party's
> mandate in the election was hardly a clear-cut endorsement either of
> its policies or its leader. Congress gained just under 27% of the
> national vote, about 1.5 percentage points less than in the last
> election in 1999. Its coalition won almost exactly the same share of
> the votes, about 36%, as the BJP's.
>
> Mrs Gandhi herself had always been careful not to promote herself as a
> prime-ministerial candidate. During the campaign, this was seen as a
> shrewd tactic to stop the BJP turning it into a presidential-style
> contest between an untested, foreign-born novice and the popular,
> statesmanlike Mr Vajpayee. It now seems that Mrs Gandhi all along saw
> her duty as limited to rescuing her late husband's party from its
> recent slump and, in her words, to providing India with "a secular
> government that is strong and stable"; but not leading it.
>
> Outside the Congress hot-house, some were relieved at that. The
> political drama in Delhi was played out against the distant thud of a
> crashing stockmarket. The Mumbai exchange suffered its worst-ever day
> on May 17th, at one point having fallen by more than 17%. The next day,
> news that Mrs Gandhi was thinking of stepping aside helped spur a
> recovery.
>
> One reason for the market's cheer was the assumed identity of Mrs
> Gandhi's replacement. Having attributed to her the wisdom of the Buddha
> it was inevitable that Mrs Gandhi's parliamentary colleagues would ask
> her to nominate one. Her choice, Manmohan Singh, is popular with
> investors as the author of India's economic liberalisation. An academic
> economist, he was Congress's finance minister in 1991, when, in
> response to a balance-of-payments crisis, the government launched a
> package of reforms, beginning the dismantling of the "licence raj" of
> state planning, import controls and excessive regulation that was
> Nehru's legacy.
>
> So his presence is heartening for investors who have two worries about
> the new government: first, that it will be hostile to business and
> reluctant to continue or accelerate the liberalisation Mr Singh began;
> second, that it will be unstable and short-lived. The fears stem partly
> from its status as a minority government. Not only will Congress rely
> on a coalition--to be known as the United Progressive Alliance
> (UPA)--but the UPA will itself be a minority (see chart), relying on
> the "outside support" of other parties, of which much the biggest is a
> "Left Front" dominated by the Communist Party of India (Marxist), or
> CPI (M).
>
> PLAYING THE RED CARD
> The CPI (M) has been in power in the state of West Bengal since 1977,
> and like ruling communist parties elsewhere, has become pragmatic in
> office. Once notorious for red tape and strikes, the state has recently
> been hard-selling its attractions as a destination for inward
> investment in information technology and services such as call-centres.
> The Communist chief minister, Buddhadeb Bhattacharjee, boasts of its
> success in promoting enterprise: exporting roses to the Netherlands,
> and housing potato-processing facilities for PepsiCo. It has even, with
> the help of British government aid, been closing down some of its
> loss-making state enterprises.
>
> But during the election, Mr Bhattacharjee said that the CPI (M) could
> never join a Congress-led coalition, because of differences on economic
> policy. Mr Singh, whom the Communists are now happy to accept as a
> prime minister, was "the first torch-bearer for the IMF". One cause of
> the stockmarket crash was a suggestion by a Communist spokesman that
> the disinvestment ministry, which oversees India's privatisation
> programme, should be abolished (not a bad idea in itself, but he
> appeared to want to abolish privatisation as well).
>
> The possibility of an end to the "disinvestment" of state enterprises,
> which in recent months helped fuel a surging stockmarket, is a specific
> fear of investors. A broader concern is that all economic policy will
> likewise be hostage to the populist demands of Congress's coalition
> partners. A number of the reforms that economists argue are most needed
> will probably not make much headway. Labour laws, for example, which
> make it hard to shed staff without state-government permission, are
> unlikely to be tackled.
>
> The same is true of the reform that Arun Shourie, the outgoing BJP
> disinvestment minister, believed the most important of all, to the
> system by which funds are allocated to government departments and
> states. He argued that these reward poor performance--"the bigger the
> deficit, the bigger the grant". But tampering with this system may not
> appeal to state leaders whose support Congress needs, such as Laloo
> Prasad Yadav of Bihar, a state notorious for economic underperformance.
>
> However, fears that reforms are about to be shelved, and the markets'
> reaction, seem excessive. The reform process has always involved more
> stops than starts, and Congress may be no worse placed to pursue it
> than was the BJP. Surjit Bhalla, of Oxus Fund Management, a hedge fund
> in Delhi, says that, since 1991, every government that has taken power
> in India has accelerated the reforms, and he expects this one to be no
> different. The Left, he says, is to Congress as the RSS was to the BJP,
> minus the RSS's communal tendencies. Just as the BJP had to resist the
> protectionist "self-reliant" economic tendency within the RSS, so
> Congress will be fending off leftist conservatism.
>
> The markets are now awaiting the "common minimum programme" Congress
> and its partners are drafting. To the extent that this mirrors
> Congress's own manifesto, it will differ little from the BJP's
> approach, though privatisation is to be "more selective", and not
> pursued, in Mr Singh's phrase, "as an ideology".
>
> The national vote was too evenly split, and too driven by local
> factors, to be interpreted as a clear mandate; much less, despite some
> attempts to do so, could it be seen as a national indictment of the
> reforms. But it has been taken as a slap in the face for the BJP from
> the mass of Indians who live in poverty in the countryside. Every new
> government pays them lip-service. This one, relishing the shock of
> victory, knows better than most how much it needs to concentrate on
> agriculture and rural infrastructure. That, however, is itself an
> argument for accelerated reform.
>
> STABILITY PACTS
> The other fear about the new government is that it will prove shaky.
> Because it tends to be a competitor for power at the state level with
> its potential partners, Congress has in the past found it hard to forge
> national coalitions. Many UPA members have a price: one wants a new
> state carved out of Andhra Pradesh; another demands the ditching of
> harsh anti-terrorist legislation. Others, notably the Left parties and
> the Samajwadi ("Socialist") Party, which won 36 seats in India's
> largest state, Uttar Pradesh, are not actually joining the coalition: a
> form of power without accountability. Not having the responsibility
> that goes with cabinet seats, they could blackmail the government on
> issue after issue, and risk turning policymaking into a saga of serial
> brinksmanship.
>
> Power in Indian politics is a great adhesive. Having touched it, the
> Left will be loth to let it slip. But managing such a complex and
> potentially fissile arrangement will demand great political skill. Mr
> Singh is, in this respect, untried. He is much admired as a kind,
> courteous and clever man. As a Sikh, he is India's first non-Hindu
> prime minister and living testimony to its secular traditions. But he
> sits in the upper house of parliament and has never won a direct
> election, though he will now have to do so in the next six months.
>
> His first challenge will be to form a government that satisfies his
> coalition partners without sacrificing his policy goals. He is
> fortunate in being able to fill most jobs from Congress ranks. Besides
> the economic portfolios, much interest focuses on the foreign ministry
> and the post of national security adviser.
>
> The next stage in the peace process with Pakistan--talks on measures to
> build confidence about the two countries' nuclear arsenals--is due next
> week. In August, foreign ministers are to meet, and by then the two
> sides should have begun to discuss the hardest issue, the status of
> Kashmir. Congress has supported the peace initiative Mr Vajpayee
> launched last year.
>
> But it may find it harder to negotiate on Kashmir than would the BJP,
> whose Hindu-nationalist background makes it less vulnerable to attack
> from chauvinists. The peace process was to be Mr Vajpayee's claim to a
> place in history. It would be good if, in opposition, he ensured that
> it enjoys bipartisan support. But his party's willingness to stoke
> racist antipathy to Mrs Gandhi, and his own silence as it did so, do
> not bode well for restraint.
>
>
>
> See this article with graphics and related items at
http://www.economist.co.uk/printedition/displayStory.cfm?Story_ID=2693501
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