Manmohan's new 'friends' fight for scraps
By Raja Murthy
MUMBAI - For a septuagenarian charged with leading the world's biggest
democracy for the next five years amid the worst global economic downturn in
even his life time, Indian Prime Minister Manmohan Singh, 76, has appeared
unusually chirpy these past few days - perhaps too much so.
The parliamentary elections that ended last week in a strengthening of the
mandate of the Congress party and its political allies appear to have produced
a difference in Manmohan's body language. In his initial meetings with the
Indian media this week, he appeared more confident and assertive, as if casting
off the more familiar look of a meek, lost, elderly professor caught in a wild
Saturday night college party.
The mood of optimism as Congress emerged with a higher-than expected 205 seats
in the Lok Sabha (Lower House), the most by any single party, was not confined
to the free-market worshipping
prime minister, the first premier in 45 years since Jawaharlal Nehru to win a
second, consecutive five-year term.
"The election results are good for India," said a happy Fayaz Ahmed munching a
sandwich during lunch hour outside the Bombay Stock Exchange (BSE) on Thursday.
Like many in India, he was prepared to back his confidence in the new
government with cash, as he envisages more money being ploughed into building
roads, railways and other infrastructure developments.
"My investment portfolio has changed towards infrastructure - that is the best
sector to invest in now." Some politicians clearly think along similar lines.
India is expected to spend more than US$500 billion in improving infrastructure
in the coming years, and share prices of companies such as GMR Infrastructure
have strengthened since the election results came in at the weekend - GMR hit a
52-week high of 171.30 rupees on Thursday.
Ahmed, a small investor who works with a leading exporter of agricultural
products, said he made a nice profit after India voted to give Manmohan and the
Sonia Gandhi-led United Progressive Alliance (UPA) another chance.
"I was very confident that the UPA would win," said Ahmed, who was part of a
larger-than-usual crowd in the searing mid-summer heat on Thursday, staring up
at the electronic ticker flashing details of the BSE Sensex index, which
hovered under the 14,000-point mark.
Unlike in recent weeks, no grim faces could be seen on Dalal Street, home to
the BSE and the heart of India's financial center in Mumbai. But there was no
festive celebratory atmosphere either. The lunch-time crowd knew only too well
that the Congress had still fallen short of a 272-seat majority in parliament
and that coalition politics will continue to feature strongly.
This was already evident in the grab to get hold of infrastructure-related
portfolios even before the government was due to be sworn in on Friday evening.
Muthuvel Karunanidhi, the 85-year-old Tamil Nadu chief minister and a Congress
ally, brazenly demanded the railways, shipping, telecommunications, surface
transport and power portfolios for his son, daughter and grand nephew.
This was a little too much for Congress leaders, who refused to treat India's
infrastructure as the family property of a wily old politician. The demands
were politely rejected, which left open the question of whether a sulking
Karunanidhi will agree to his Dravida Munnetra Kazhagam party being part of the
UPA government or support it from outside.
Manmohan does have some leeway in his appointments. On Wednesday, he submitted
letters of support from 322 members of parliament to President Pratibha Patil
to retain his prime ministerial job. The cushion of 40 extra MPs gives him more
room to execute controversial open-market policies, such as freeing fuel prices
from regulatory control and selling stakes in profitable government-owned
companies.
The probability that the government will sell some of its stakes in
government-owned companies, also called public sector companies, appeared so
certain that share values of 46 of these jumped by between 10% and 20% on
Monday, adding another $37.79 billion to their capitalization.
India's central and various state governments own, for instance, 80.35% of the
$61 billion Indian Oil Corporation, one of India's largest companies and a
Fortune 500 listee. The oil and related energy industries are expected to be
among key growth sectors in Manmohan's second period in office.
Yet while Congress feels it can withstand arm-twisting from the Tamil Nadu
chief minister and his family, only a diehard optimist would bet on the prime
minister, who has no personal political base, having a peaceful five years with
other coalition allies, such as the 54-year-old mercurial Mamata Banerjee and
her party.
Banerjee, who heads the Trinamul Congress Party, came to international
prominence this year when, in uncompromising fashion, she drove away Ratan Tata
and his project to build the world's cheapest car, the Nano, in West Bengal, in
a row over the sale of agricultural land to be used as a factory site.
Mamata Banerjee is front-runner to replace the very successful Lalu Prasad
Yadav as India's next railway minister. She is also expected to replace the
routed communist parties in blocking the free-market policies so loved by
Manmohan. The Left Front, a key ally of the previous UPA grouping, won only 15
seats compared with 35 in the previous general elections in 2004.
"Even though this new government does not need the left parties, the fact that
it depends on people like Mamata Banerjee causes us concern," said V Satyan,
assistant vice president of First Overseas Capital Limited, a financial firm
whose offices are directly opposite the Bombay Stock Exchange entrance.
India's market analysts expect Manmohan's second term to feature fewer
crowd-pleasing handouts, lower taxation, and disinvestment of public-sector
companies such as Indian Oil Corporation. Selling off public-sector companies
was among major issues over which Manmohan had a recurring battle with his
erstwhile communist allies.
Satyan also expects the new government to generate more domestic sources of
investment. "Foreign investors tend to run away whenever some bad news like a
terrorist attack happens," he said. "It's much better for India's long-term
growth if we depend more on local investors."
Manmohan's lack of a political base arises in part from his bureaucratic
background; with a degree in economics from Cambridge University, he had stints
as professor at the prestigious Delhi School of Economics, deputy chairman of
the Planning Commission of India and governor of the Reserve Bank of India,
before being appointed finance minister in 1991.
In that position, he played a vital role in opening up the economy. When he
took over as finance minister, India suffered the humiliation of having to sell
its gold reserves to pay off foreign debt. In 2009, he continues his job with
India as one of the world's dozen trillion-dollar economies.
He was initially appointed prime minister by the Italian-born Congress leader
Sonia Gandhi in 2004, to avoid controversies over her foreign origin that might
have surfaced had she sought to lead the government personally. The political
grandee and the learned economist have since built a strong relationship, with
Gandhi remaining the center of power as Congress party leader and UPA
chairperson (see India's
dynamic political duo, Asia Times Online, Nov 7, 2009).
Manmohan's lack of political roots proved to be a strength as well as a
weakness during his first prime ministerial term. While he has less need than
others might have to pander to vested interests and has earned the respect of a
nation, he has also showed a stubborn streak and a barely hidden impatience
with democratic discussions. This was notable during his fixation with the
controversial India-US civilian nuclear deal that he supported as almost an
obsession.
Critics of the deal, which divided the county and nearly brought down the
government in 2008, say the $100 billion of business it gives to the struggling
US nuclear industry is a primary reason for the deal, rather than any
scientific possibility of American nuclear reactors significantly solving
India's energy problems.
Manmohan, however, claimed to be listening to his "inner voice", in the famous
manner of former US president George Bush with whom he runs a mutual admiration
society.
For a more harmonious second term, Manmohan would be advised to stick to
listening to inner voices in matters regarding his personal life, but to heed
the public voice in his position as a proxy leader of a coalition government in
a democracy.
India and its economy now have a positive, possibly self-sustaining momentum,
but woe betide leaders forgetting their place and taking the people for
granted.
The Sensex Index, as if reflecting investors' more considered thoughts since
the 17% gain to 14,284 on Monday that welcomed Manmohan's victory, fell back to
13,736 by Thursday evening.
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