Global Issues
POLITICS-INDIA: New Govt. To Go Easy on Reforms
While the centrist Congress party may have decimated political opponents to the left and right in the just concluded elections here it is likely to go easy on deepening reforms begun five years ago.
'I see no major change from the previous Congress-led government where economic and foreign policies are concerned,' Sanjay Kumar, at the prestigious Centre for the Study of Developing Societies (CSDS) - that is partly funded by the government - told IPS in an interview.
With the communist parties of the Left Front suffering a humiliating defeat in their traditional bastions of West Bengal and southern Kerala there is little for the Congress-led United Progressive Alliance (UPA) coalition to fear.
In fact, the Left Front’s debacle - having its seats reduced from 61 in the last parliament to 24 - is now being attributed to its own attempts to rapidly industrialise unmindful of consequences to the rural peasantry whose cause the communists have traditionally championed.
At least 14 people died after police in West Bengal opened fire on farmers protesting forcible acquisition of their land by the Marxist-led government on behalf of the Tata group which had plans to set up an automotive assembly plant. The project was later relocated to western Gujarat state.
Manmohan Singh was elected Tuesday by the Congress party to lead its parliamentary party, paving the way for his second term as prime minister. He spoke about 'grasping the nettle' of reforms and 'creating a social and political environment in which new investment can be made.'
Singh set about putting together a new cabinet this week. The media speculates that he is keen to appoint Montek Singh Ahluwalia, a former World Bank bureaucrat and currently deputy chairman of the planning commission, as finance minister - this suggests that a new pro-reform dispensation was in the making.
But Kumar, a noted psephologist, said he preferred to wait until the cabinet was actually announced, before commenting. 'Whatever the case the Congress party is unlikely to undo electoral gains from introducing schemes that benefited the rural poor such as the loan waivers and the National Rural Employment Guarantee (NREG) scheme,' he said.
The NREG scheme provided a legal guarantee for 100 days of employment in every financial year to adult members of any rural household willing to do public work-related unskilled manual work at the statutory minimum wage.
Although criticised for less than perfect implementation, and for raising the fiscal deficit by an estimated 10 percent of GDP, the NREG steadily increased the purchasing power of people across rural India since it was introduced in 2005.
The Congress party returned to power in 2004 after an eight-year gap, promising to 'give a human face to reforms,' and make up for the errors committed by the previous right-wing, Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) coalition whose policies were said to have increased the divide between the urban elite and India’s vast rural population.
Interestingly, in the month-long elections, for which counting was carried out on Saturday, the Congress party also swept seats in the major urban centres of Delhi and Mumbai. The BJP-led NDA coalition could only manage a total of 159 seats this time.
Kumar said that while the new government may feel compelled to meet the high expectations of the market when it came to cabinet appointments this is bound to be outweighed by sensitivity to its voters in the rural areas.
On Tuesday India’s benchmark stock index, the Bombay Stock Exchange’s sensitive index climbed for a second day - extending a 17 percent rally Monday that forced regulators to halt trading - on speculation that the Congress party would be appointing a cabinet that would accelerate reforms and boost economic growth.
But Kumar attributed the rally to euphoria over the promise of a stable government in place of the fractured verdict that was predicted by most experts.
Confirming Kumar’s belief that the Congress party would tread carefully on cabinet formation, a Congress party source told IPS Tuesday that India’s present finance minister Pranab Mukherjee was likely to continue in the same job. The source asked not to be quoted for fear of disciplinary action.
Kumar pointed out that known reformists had held key positions in the coalition government that was dissolved Monday, although the Left Front allies were seen to be 'applying the brakes' on foreign investments and the sale of stock in public sector undertakings.
The Left Front withdrew support to the Congress-led UPA coalition in protest against a civilian nuclear deal with the United States, plans to raise the foreign investment limit in the state-run insurance sector form 26 percent to 49 percent, and also a plan to open up the gigantic pension system to foreign participation.
With Singh’s coalition bagging 262 seats - including 206 by the Congress party on its own - he can easily organise from among a plethora of friendly parties or independents the 10 seats needed for a simple majority in the 543-member lower house and comfortably run a full five-year term.
Speaking with IPS, minister for commerce and industry Kamal Nath said the next government can be expected to be cautious about banking and insurance reforms and would prefer to stimulate the rural economy through domestic investment. 'Don’t forget that some of the advocates of financial reforms in the world have been proved wrong by the recession.'
Nath said the focus could be expected to be on reviving the economy in an India-specific manner that takes into account a 'global economy that is in recession.'
India, said Nath, was ready to play a role in reviving the global economy such as by helping to conclude the Doha round of trade talks. Nath is tipped to continue in the same ministry or move on to being minister for external affairs.
© Inter Press Service (2009) — All Rights Reserved. Original source: Inter Press Service