LEFT SHAKES DOWN CONGRESS USING ITS COALITION

C O N F I D E N T I A L SECTION 01 OF 02 NEW DELHI 006635

SIPDIS

E.O. 12958: DECL: 08/26/2015
TAGS: PREL PGOV ECON ELAB IN KDEM MNUC
SUBJECT: LEFT SHAKES DOWN CONGRESS USING ITS COALITION
LEVERAGE


Classified By: A/DCM-Geoff Pyatt for reasons 1.4 (B, D)


1. (C) SUMMARY: The Indian Left, led by the CPI(M),has
been on a political roll. It has pressured the UPA
government to forestall disinvestiture plans, to sack a
Cabinet minister and to support economically-unsound programs
such as the "National Rural Employment Guarantee Bill"
(septel). Pundits have begun to wonder if the UPA's, and
more specifically, Prime Minister Singh's globalization and
economic reform efforts have become a victim of the Left's
growing influence. In a recent interview, however, the PM
firmly reaffirmed his commitment to globalization and his
reform agenda and struck back at the Left. The PM has
criticized the doctrinal dichotomy between the
business-friendly "communists" ruling West Bengal and the
die-hard ideologues in Delhi. While this inconsistency may
merely be a reflection of the old adage that "all politics is
local", it also reflects the Left's general political
strategy of setting itself up to beat Congress in local
elections in West Bengal and Kerala in 2006. Congress'
continued reliance upon the Left's support from the outside
is exemplified by the PM's statement that "a politician
before he can become a statesman has to remain in office long
enough--so we have to make those compromises." We will
undoubtedly see both Congress and the Left clamoring to claim
credit for passage of the "National Rural Employment
Guarantee Bill" as they seek to ingratiate themselves to the
vote-rich rural poor. At the same time the government seeks
to implement economic reforms, they will have to adjust to
the fits and starts leveraged against them by to their
uncooperative Left coalition partner.
End summary.

Red Storm Rising
--------------

2. (U) As the summer of 2005 waned, the Indian Left, led by
the new generation CPI(M) appeared to be on an influential
political roll. In early August, the Left first pressured
the UPA government to forestall the disinvestiture of Bharat
Heavy Electricals Ltd (BHEL) and Maruti Udyog Ltd (MUL).
This was followed by the sacking, at the Left's insistence,
of Cabinet Minister Tytler following the release of the
Nanavanti Commission report on the anti-Sikh riots. And,
most recently, the passage of the "National Rural Employment
Guarantee Bill" was viewed by some as yet another political
victory for the Left, despite being the brainchild of
Congress Party stalwarts. Pundits were left wondering if the
UPA had become vulnerable to the Left's growing influence.

PM Strikes Back
--------------

3. (U) In a key interview with "McKinsey Quarterly Journal"
(MQJ) on 25 August, however, the PM abandoned his normal
non-confrontational style and fired broadsides at the Left as
he reaffirmed his commitment to globalization and his reform
agenda. The PM praised Buddhadeb Bhattacharjee's communist
government in West Bengal, highlighting the doctrinal
dichotomy between the pragmatic, business-minded communists
in Kolkata and the party dinosaurs in Delhi. The PM made a
strong argument for labor reform, but added "we don't have
the broad-based consensus in our coalition for me to assert
that I can move forward in a big way." While the Left in
Delhi has opposed every UPA attempt at labor market reform,
public sector divestment and foreign investment, the Left in
West Bengal has embraced these measures--much to West
Bengal's economic benefit.

Coalition Realpolitik
--------------

4. (U) Political observers note that this doctrinal
dichotomy between the Left's political center (Delhi) and its
regional power base in West Bengal merely reflects the old
adage that "all politics is local". The Left's prize over
the horizon is the Kerala and West Bengal state elections
slated for February 2006, where the communists will be in
direct competition with Congress. In order to avoid becoming
a subset of the Congress-led UPA government at the national
level, the center must maintain its "opposition" mantle.
Yet, to stimulate its base at the state level, the Left must
obtain economic results. In essence, the center has the
luxury of ideological purity over the practical problems of
governance faced by the local governments. For its part, and
in realization of the realpolitik involved with coalition
partnerships, Congress not only must indulge the Left's
support from the outside but must also watch for the threat
of a "Third Front", i.e., a Left-BJP or Left-regional parties
grouping, which for now remains highly unlikely. With an eye
to his legacy, the PM has apparently recognized this
realpolitik as he was quoted in the McKinsey article as
noting that "a politician before he can become a statesman
has to remain in office long enough--so we have to make those
compromises."

Playing to the Masses
--------------

5. (C) With the recent passage of the "National Rural
Employment Guarantee Bill" (septel),we will undoubtedly see
both Congress and the Left clamoring to claim credit for its
passage as the parties seek to ingratiate themselves with the
rural poor. Moreover, while the Congress-led UPA government
and the PM will continue to seek to implement their
globalization and economic reforms, they will continually
have to adjust to the fits and starts leveraged against them
by the Left. As the PM observed, "one must understand that
economic policy and decision-making do not function in a
political vacuum." The cost of this coalition management in
the short-term is as usual borne by the Indian tax-payer, who
must pay for costly and economically unjustifiable
expediencies like the jobs bill.
MULFORD