HAVING SURVIVED 2005, THE UPA WILL BE MORE

C O N F I D E N T I A L SECTION 01 OF 04 NEW DELHI 000370

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/18/2016
TAGS: PREL PGOV ECON PHUM PINR KDEM IN
SUBJECT: HAVING SURVIVED 2005, THE UPA WILL BE MORE
CAUTIOUS IN 2006

REF: A. NEW DELHI 909

B. NEW DELHI 3933

Classified By: Ambassador David C. Mulford, for Reasons 1.4 (B, D)


1. (C) Summary: Most political observers expect the
Congress-led UPA government of Prime Minister Manmohan Singh
to remain in power until the end of its term in 2009,
although it is likely to proceed cautiously on economic
liberalization and closer ties with the US out of fear of
provoking its Left Front (LF) allies and their sympathizers
within Congress. In 2005, Congress stumbled and exhibited
poor judgment, losing control of Bihar and Jharkhand, and
expelling its scandal-plagued Foreign Minister Natwar Singh.
Despite this, it deflected weak BJP challenges to solidify
its hold on power. This was due not so much to political
skill as an inept BJP opposition. The party suffered from
disunity and infighting, and its aging leaders LK Advani and
Atal Behari Vajpayee lost most of their influence. With no
clear replacement in sight, the BJP inducted a stopgap leader
in Rajnath Singh and reiterated its support for the RSS and
Hindutva, all but ensuring further decline. This BJP
implosion allowed the LF to fill much of the political
vacuum, carve out a distinct ideological space, galvanize its
committed cadre and attract regional allies, which could
result in greater challenges for Congress in 2006. For the
PM, 2005's travails tested but strengthened him; but his
biggest challenge for 2006 is less the weak opposition than
the Congress rank and file's own ambivalent views on the US
and weak senior party leadership. End Summary.

Overall - a Good Year
--------------


2. (C) In 2005, the UPA government centered around Congress,
successfully established some political momentum, solidified
its hold on power, and pursued closer US-India ties (Ref A).
Uneven Congress management of the fractious UPA coalition and
determined resistance by the LF slowed the pace of economic
reform and compelled the UPA to move cautiously on issues of
concern to the US. But on balance, 2005 was a good year for
Manmohan Singh. The opposition BJP continued its political
and electoral tailspin and divisive infighting, leaving the
political field largely to the UPA and the LF.

Luck - Rather than Skill - Favors Congress
--------------


3. (C) Congress successes in 2005 were only partially
attributable to political skill and decisive leadership.
Congress mismanagement and poor strategy resulted in the fall
of UPA governments in Jharkhand and Bihar in the February
state assembly elections and the dismissal of Foreign
Minister Natwar Singh in November, after allegations of
involvement in shady dealings with the Saddam Hussein regime.
Reverting to form, Congress invited defeat by attempting to
use its power in New Delhi to install Congress governments in
Goa, Bihar and Jharkhand, in some cases reportedly against
the principled advice of Prime Minister Singh. Congress
efforts were counterproductive, and discredited the party,
leaving it only with the tiny state of Goa to claim as a
successful power grab.


4. (C) Congress was more lucky than skillful, as the
opposition BJP did not present a serious challenge. The BJP
scored some political points against Congress in the Winter

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Parliament session (November/December) over allegations in
the Volcker Report that Congress and Natwar Singh had
profited from Iraqi oil deals. Although forced to sack
Natwar in November, Prime Minister Manmohan Singh ably
defended Congress and Sonia Gandhi thereafter, until
televised evidence of corruption by BJP MPs took the teeth
out of the opposition attack. Congress also easily defeated
an inept and unpopular regional party in Haryana in the
February state assembly elections.

But It has Leadership Assets
--------------


5. (C) Manmohan Singh is a key Congress asset. He enjoys
widespread popularity inside and outside of party circles and
is regarded as a "consensus Prime Minister," in that all
parties are comfortable with him. As a result, Congress
relies heavily on PM Singh, who currently holds seven Cabinet
portfolios, including that of Foreign Minister. An expected
UPA Cabinet shuffle early in 2006 is reportedly intended to
relieve the PM from his seemingly insurmountable workload,
which at times threatens to overwhelm him. Senior party
contacts have told us that the PM prefers to defer the
Foreign Ministry decision until March, in order not to
disturb the finely balanced UPA line-up before the
President's visit. Defense Minister Pranab Mukherjee is a
prime contender for the Foreign Minister slot. Like much of
the LF leadership, Mukherjee is a Bengali and the party's
liaison with the left, and his appointment could help defuse
Communist attacks on the UPA's pro-US agenda. Another rumor
making the rounds asserts that Shivraj Patil's lackluster
performance as Home Minister will compel Mukherjee to take
that portfolio, with Finance Minister P. Chidambaram taking
External Affairs. Sonia Gandhi, who was declared "Indian of
the Year" by NDTV, is growing in stature and the nativist BJP
has stopped trying to discredit her as a "foreigner." This
reflected Mrs. Gandhi's increased confidence and comfort in
her political role. During the year, her efforts to project
her son Rahul as the "heir apparent" met with little
enthusiasm, resulting in a "draft Priyanka" movement aimed at
convincing the reluctant Gandhi daughter to take up the
family's political mantle.
And Advanced its Agenda
--------------


6. (C) The fortuitous combination of luck and leadership
allowed Congress to advance its foreign policy and economic
agendas in 2005 to the mutual benefit of India and the US.
The India/US relationship continued to grow closer. As
Congress demonstrated its commitment to the strategic
framework by voting against Iran in a contentious IAEA vote
and laying the groundwork for implementation of the July 18
Civil Nuclear Agreement. On the economic front, the UPA
signed a multimillion dollar deal with Boeing for the
purchase of aircraft and removed the last roadblocks to
re-active the long-closed Dabhol energy project, and made
incremental progress on liberalization and privatization.

The BJP Could Be Out for the Count
--------------


7. (C) The BJP's NDA coalition grew increasingly thin in
2005, having shrunk from a high of 24 parties to a mere 10
and most observers expect further decline in 2006. The
remaining partners are increasingly uncomfortable with the
BJP, especially since its renewed endorsement of Hindu

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nationalism. The NDA ally Janata Dal(U) won the Bihar
election in February and formed the government there, but is
not on good terms with the BJP, which has little influence in
the state. The BJP victory in Jharkhand resulted from
Congress ineptitude rather than BJP popularity, and the
government there remains unstable. The BJP enters the new
year with no prospect of near term electoral victories, as it
is not strong in any of the states holding assembly elections
in 2006. Despite the naming of Rajnath Singh as party
president, the BJP has little chance of renewal in the Hindi
belt. Its governments in Rajasthan and Madhya Pradesh are
unstable, as the party in both states is deeply divided.
Continued BJP infighting could provide targets of opportunity
for the UPA if these governments fall.

But Congress Cannot Count on Luck in 2006
--------------


8. (C) In 2005, the stiffest opposition to the UPA came not
from the BJP/NDA, but the government's purported LF allies,
and this trend will continue in the new year. Not
comfortable supporting its arch-enemies in Congress, the LF
eventually hopes to part company with the UPA and replace it
with a new coalition of left and regional parties. Most
political observers agree, however, that this option is a
long shot that could take years to gel. In the absence of a
credible opposition alliance, the UPA can expect to remain in
power until its term expires in 2009.


9. (C) Congress is already concerned about the LF's growing
influence, and expected Communist electoral successes in West
Bengal and`Kerala could make the GOI even more cautious
regarding the blossoming US/India relationship and its
economic liberalization agenda in the coming year. State
assembly elections are scheduled in West Bengal, Kerala,
Tamil Nadu, Pondicherry, and Assam, with most of these
contests likely to occur in the Spring (possible timing is
the prerogative of the Election Commission, which much
announce a date at least 36 days in advance. Congress has
sitting governments in Kerala, Pondicherry and Assam. Most
observers predict that the Communists will unseat Kerala's
UPA/Congress government and the NDA will replace the
UPA/Congress government in Assam. Congress must also face
possible adverse consequences of its behavior in 2005.
Although the danger has diminished somewhat, the Supreme
Court could still rule that Congress meddling in the Bihar
election was unconstitutional, leading to calls for the
resignation of PM Singh and other Congress leaders.

High Times for the Communists
--------------


10. (C) The LF could prove to be the UPA's biggest political
challenge in 2006. Since the UPA does not enjoy an absolute
Parliamentary majority, it must rely on LF support to remain
in power. As one observer put it, this government's survival
is "an Indian rope trick" that defies gravity and depends on
a fine balance of political forces. Although the BJP has
opposed many UPA economic reform measures, there is little
difference between the NDA and UPA on foreign policy issues,
leaving the LF a distinct political space as the most
outspoken opponent of economic liberalization UPA efforts to
move closer to the US. As the only voice for the left
anti-globalization stance, the LF has galvanized a solid and
dedicated cadre and could prove more vociferous in 2006 than

2005. It could also gain increasing stature among the

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often-fickle regional parties. In the Indian political
system, regional parties must seek-out a national partner to
have a voice in New Delhi and protect their local interests.
With the BJP increasingly ineffectual and unpopular, some
regional parties have begun to work with the Communists as a
more palatable alternative and more could be tempted to link
up with the left.


11. (C) In 2005, the LF and Congress held on-again,
off-again "consultation meetings" to work out their
differences on economic and foreign policy issues. The LF
insisted that the UPA commitment to a "Common Minimum
Program" pledged it to move slowly on economic
liberalization, retain much of the public sector, and adopt
populist poverty relief measures. The LF periodically
canceled the coordination meetings as a pressure tactic
whenever it judged that the UPA had gone "too far," in
pushing its economic agenda. Although many in Congress view
the LF approach as obstructionism, the party's Left wing is
sympathetic to the LF stance and does not want to see
Congress too closely identified with economic liberalization
and a pro-American foreign policy. This chemistry has led
the UPA to concede to LF demands on several occasions rather
than risk losing its Left support and alienating Congress
leftists. In September, the UPA voted against Iran and with
the US in the IAEA, touching off a firestorm of protest by
the LF and critics within the party. They decried the vote
as a "sell-out" of India's "non-aligned principles," and
insisted that India vote with Iran in future votes and do
nothing to endanger a proposed natural gas pipeline project
with Iran.

Comment - 2006 Could be More Challenging
--------------


12. (C) Congress weathered political storms (many of its own
making) to retain and solidify its hold on power in 2005, but
2006 could prove more problematic. Both Congress and the BJP
made serious political errors in 2005 but the BJP's proved
more egregious, allowing Congress to bounce back. Congress
is unlikely to see the same set of fortuitous circumstances
in 2006. With coalition equations now dominant, Indian
politics will remain a bouncy ride, as fickle regional
parties shift their loyalty from national party to national
party, and the LF's increased stature has added more
uncertainty to the mix. Congress is likely to continue to
make mistakes in 2006, while retaining power in New Delhi.
The BJP shows little sign that it is ready to come out of its
tailspin and coalesce. The big challenge will be the Left,
which has chalked out a solid ideological position and is
increasingly determined to play the spoiler. In this
delicate political balance, the UPA has little room for
maneuver and its own internal ideological divisions, which
remained in the background in 2005, could come to the fore,
touching off increasing conflict between the pro-reformist
wing surrounding PM Singh and those sympathetic to the LF.
Such a conflict could try the already-stretched leadership
skills of Sonia Gandhi and Manmohan Singh. Although
dedicated to economic liberalization and closer ties with the
US, Congress could be forced to adopt a more cautious
approach in 2006, even as India's professor Prime Minister
needs to educate his party on the country's changing place in
the global economy.
MULFORD