THE UPA AT THREE YEARS - MIRED IN MEDIOCRITY

C O N F I D E N T I A L SECTION 01 OF 05 NEW DELHI 002475

SIPDIS

SIPDIS

E.O. 12958: DECL: 05/23/2017
TAGS: PGOV PREL ECON PHUM PINR PTER KDEM IN
SUBJECT: THE UPA AT THREE YEARS - MIRED IN MEDIOCRITY

Classified By: A/PolCouns Atul Keshap for reasons 1.4 (B,D)


1. (C) Summary: Prime Minister Manmohan Singh released a
"Report to the People" on May 22, outlining the achievements
of his UPA government at the three year point. The PM
acknowledged that inflation is a problem, providing
assurances that his government would take measures to keep it
from hurting the poor. He also noted the need for measures
to address rural poverty and the lack of infrastructure. The
report emphasizes that while India has experienced five years
of record economic growth, it will not in and of itself
significantly reduce poverty. The PM pledged his government
to policies aimed at "inclusiveness," that would ensure
benefits to the widest number of Indians. Although the BJP
immediately and predictably dismissed the UPA government as
an "utter failure," most observers were more objective,
giving the UPA a mixed record, with some successes and some
failures. Despite the high-flying rhetoric from the PM, most
of the UPA programs are still in early implementation and
many have yet to leave the drawing board. Polling data,
media reports, anecdotal evidence and the views of Embassy
contacts point to a growing sense of malaise within and
without the UPA, although support for the nuclear deal is
getting ever stronger. While the UPA conceives large
programs, it has trouble carrying them out and there is not
much confidence that the government will make much progress
in poverty reduction. The failure of the UPA to energize the
electorate or generate much enthusiasm is reflected in its
poor electoral performance, including the most recent
Congress defeat in Uttar Pradesh. With both Congress and the
BJP in the doldrums, regional parties are moving in to pick
up the slack, most notably the BSP of UP Chief Minister
Mayawati. While the regionals will nip at the heels of the
UPA (and the BJP) in coming contests, future elections are
likely to be multi-sided affairs yielding awkward coalitions
with unclear mandates. End Summary.

Another Year - Another Report
--------------


2. (U) On May 22, Prime Minister Manmohan Singh convoked the
leadership of the UPA coalition at his residence, where he
unveiled his third "Report to the People," outlining the
achievements of his government after three years in office.
In his speech, the PM emphasized that while India has seen
economic growth rates over 8.5 percent for the past five
years, the UPA's principal objective has been to ensure that
this results in "employment generation, poverty reduction and
human development." The Prime Minister attributed India's
high growth rates to an "unprecedented increase in the rate
of investment," which, he emphasized, has generated
employment and reduced poverty. However, he pointed out,
this in and of itself "does not address the challenge of
employment promotion, poverty reduction and balanced regional
development." For that to take place, "economic growth much
be socially inclusive and regionally balanced."

The Elephants in the Room
--------------


3. (U) A higher than targeted inflation rate has exposed the
UPA to increasing criticism from the opposition parties and
the Left Front (LF),even as inflation has started to fall
from recent highs. In his speech the PM acknowledged that
this was a problem, stating that "galloping demand for many
products" is a "cause for concern" and a "shortfall in
production of these commodities" has pushed up prices. He
pledged that his government would be "vigilant" to ensure
that "the poor and vulnerable sections of society do not
suffer unduly." The PM emphasized that "we need to resolve
the relatively poor performance of the agriculture sector in
the nineties," and pledged his government "will be unveiling
a major initiative which will not only enhance the total
public sector investment in agriculture but will also enable
states to resolve problems of agriculture."

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The Seven Magic Goals
--------------


4. (U) The report outlines seven policies aimed at achieving
its principal goals, many of which reflect the populist
budget allocations passed by Parliament this month. These
include:

--increased investment in rural areas and agriculture

--increased credit availability to farmers

--increased rural employment

--increased spending on education and healthcare and
strengthening the midday meal scheme

--increased investment in urban renewal

--empowering the scheduled castes/tribes, other backward
classes (OBC's),minorities, women and children

--ensuring that public investment and the benefits of growth
are spread to "backward regions and districts"

A Long Laundry List
--------------


5. (U) The report itself is a long laundry list of projects
aimed at achieving these seven basic objectives. The
flagship of the UPA's Common Minimum Program (CMP) is the
Bharat Nirman program (for rural areas and agriculture),the
National Rural Employment Guarantee Scheme (NREGS),and the
Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
The UPA has doubled the amount of public funds going to
health and increased education outlays by 34 per cent over
2006, while vastly increasing outlays for rural housing,
employment generation, roads, electricity and urban renewal.
According to the UPA, approximately 16 million households
have benefited from the NREGS program, which is aimed at
providing 100 days of work on public projects to one member
of each rural household per year. The NREGS program is
purportedly funding construction of 500,000 public works
projects in the 200 districts (out of a total of 600) where
it is operational, half of which are much-needed water
projects. The JNNURM is currently up and operating in 63
cities, where the UPA maintains it is developing urban
infrastructure and providing basic services to the urban
poor. It has increased spending on the mid-day meals program
(which provides free lunches to primary school students) by
500 percent, and electrified 39,000 villages in the last two
years.

But Much Remains on the Drawing Board
--------------


6. (U) Although the UPA was quick to take credit for many
achievements, many of its proposals remain unrealized. It
has submitted a Women's Reservation Bill to Parliament, for
example, but it has never come up for a vote. The UPA is
"considering" a proposal to strengthen anti-corruption
infrastructure, including some amendments to the Prevention
of Corruption Act. The UPA's National Rural Health Mission
(NRHM) has set ambitious targets to be met by 2012. These
include: cutting infant mortality in half (from 60 to 30 per
1,000 live births),reducing the fertility rate from 3 to
2.1, increasing the number of beds available in government
hospitals, eliminating leprosy and halting and reversing the
HIV/AIDS epidemic. The UPA has submitted to Parliament a
"Model Right to Education Bill" that would guarantee a
"fundamental right to education" to all Indians through the
secondary level.

What About the Rest of the World?

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--------------


7. (U) The report makes heady claims regarding the UPA's
achievements in the foreign policy arena. At the top of the
list is the civil nuclear accord with the US, improving
relations with Pakistan and China, addressing crises in the
South Asian region and "giving an economic thrust to its
diplomacy with the leading powers of the world." The UPA
insisted that its foreign policy was "independent, built on
national consensus and based on supreme national interests."
The report listed the forging of closer political, economic
and cultural ties" with its neighbors as a "high priority,"
as "maintaining and nurturing a peaceful neighborhood is a
prerequisite for India's high economic growth to continue."
While expressing pleasure at the continued progress in the
India/Pakistan initiative, the report emphasized that "the
health of the peace process depends crucially on Islamabad
honoring its January 6, 2004 commitment to not allow its
territory to be used for terror activities directed against
New Delhi." The UPA was particularly proud of the "sustained
and comprehensive development" of India's relations with
China, stressing that bilateral trade has increased to 25
billion dollars and is set to grow to 40 billion dollars by

2010.

The BJP Has its Own Report
--------------


8. (U) On May 23, BJP President Rajnath Singh released his
party's 66 page report entitled "UPA's three years, aam
aadmi's (common man's) tear years." Singh described UPA rule
as "faceless, directionless and spineless," as the government
is led by a Prime Minister "who has no say in his own
Cabinet." Senior BJP leader LK Advani described UPA rule as
an "utter failure." Accusing the UPA of being "soft" on the
nation's security, Advani claimed that this was "the first
time in the history of the nation that a government was
headed by a non-Prime Minister, not accountable to Parliament
(Sonia Gandhi),and surviving on a life-support system
provided by parties (the Left) that behaved more like the
Opposition." Advani accused the UPA of failing to check
steep price rises of essential commodities, which
"demonstrated its betrayal of the common man," while failing
to provide internal security, by "adopting a soft approach in
dealing with the jihadi menace."

Pundits are More Objective
--------------


9. (U) Most observers without an obvious partisan agenda
were more objective, giving the UPA mixed reviews. Most
applauded the India/US civil nuclear accord, stating that its
completion would be a major foreign policy achievement for
the UPA. G. Parthasarthy, the former High Commissioner to
Pakistan, criticized what he characterized as the UPA's
tendency to rush into foreign policy initiatives without
thinking issues through. He described the progress made on
relations with Islamabad as "fitful at best," criticizing the
UPA for "a total lack of understanding of security
imperatives or the dynamics of terrorism in dealing with
Pakistan." Former National Security Advisor Brajesh Mishra
lamented that "the Pakistan policy is now in limbo because of
internal problems. Editorials pointed out that there is
considerable dissension in foreign policy between Congress,
its UPA ally the DMK and the Left Front, especially when it
comes to relations with the US, the US/India nuclear deal and
the India/Iran relationship.


10. (C) Although the PM promised UPA "vigilance" to prevent
the poor from suffering from the impact of inflation, this
seems incongruous at best, as the suffering is already taking
place and UPA critics are taking political advantage of it.
Although economists are quick to point out that there are
many reasons for an increased inflation rate, commentators
connected to the BJP, other opposition parties, and the Left

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have been quick to blame alleged economic mismanagement for
any increases, and for the wave of farmer suicides that have
afflicted some parts of the country for the past 10 years.
Critics on the left in particular have asserted that although
the PM claimed that he wanted the benefits of economic growth
to be inclusive, they were not trickling down to the common
man. Congress Cabinet Minister Mani Shankar Aiyer warned
that the UPA was "in danger of losing the common man's
support if the government did not correct its economic
policies."

Poor Political Track Record
--------------


11. (U) Some pundits noted that Congress had a poor track
record when it came to managing the UPA coalition, as three
political parties (the MDMK, TRS and JD-S) had left the
alliance and the Samajwadi Party (SP) had withdrawn support.
Managing this contentious coalition had also distracted the
UPA and kept it from focusing on governance. As a result,
the UPA failed to meet many of its ambitious targets and many
programs remained on the drawing board. For example, while
the National Rural Employment Guarantee Scheme (NREGS)
promised 100 days of employment per rural household, the
national average was actually 37.5.

A Government Standing Still
--------------


12. (U) The Times of India released its own national poll in
advance of the UPA report. It showed a government muddling
through, but not generating a lot of popular excitement. The
previous poll was in November 2006 and there had been little
or no change in key attitudes since then. Despite Congress
efforts to push Rahul Gandhi into a leadership role, those
who stated he should play a larger political role declined
from 61 percent to 56 percent. Those stating that their
lives had improved under the UPA went up only marginally from
36 percent to 38 percent, while those who believed their
lives had become worse also increased from 24 percent to 27
percent. Those approving the UPA's handling of the economy
also declined marginally from 52 percent to 50 percent. The
US/India nuclear deal was one of the few unalloyed bright
spots as with 52 percent saying that it had helped the UPA
government, up from 47 percent in the previous poll.

The View from the Left
--------------


13. (C) In a May 22 meeting with Poloff, S. Sudarkar Reddy,
an MP from the Communist Party of India (CPI),expressed mild
displeasure with the UPA's performance. He accused the UPA
of playing a double game, encouraging harmful "free trade
policies," while not doing enough for the poor who are
suffering the impact of these policies. (Note: India
actually continues to maintain very high agricultural tariffs
in order, ostensibly, to protect its poor farmers. End
note.) Reddy expressed admiration for PM Singh, whom he
credited with being an honest man with his heart in the right
place, but opined that this Prime Minister would never be
able to implement a serious development program aimed at
poverty reduction. Reddy pointed out that the BJP had
suffered a serious defeat in UP and had seen its entire
Hindutva agenda rejected by the voters. This, he noted,
freed the Left parties to take a more aggressive stance
against the UPA's economic agenda, as they no longer had to
fear a BJP resurgence. In Reddy's opinion, both the BJP and
Congress are faring badly and the big winners have been the
regional parties, who will play a larger role in national
politics. He conceded that the Left parties were also
stagnating and would remain confined to their "red forts" in
West Bengal, Kerala and Tripura. He predicted that the
Communists would likely lose a few seats in the next
election, but there would be no dramatic change. Reddy hoped
that the Left and Congress could part company in the 2009

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national election and that the Communists could join with
resurgent regional parties to form their own government.

And From Within Congress
--------------


14. (C) On May 22, Digvijay Singh, the former Chief Minister
of Madhya Pradesh and a quintessential Congress insider, told
Poloff and PolCouns that Congress is faring badly in
elections because it was reluctant to embrace its own
progressive and secular ideology. He complained that
Congress has backed away from confronting communalism and
casteism and this was hurting the party at the polls. Singh
opined that caste and religious identity were losing their
political usefulness and that Congress would benefit from
this ongoing social change if it embraced an uncompromising
position on these issues. Instead, he lamented, the party
embraces "soft Hindutva" and panders to Muslim
fundamentalists, while regional parties continue to undermine
Congress and its vote blocs. Singh maintained that it is
irrelevent whether Manmohan Singh survives as Prime Minister,
emphasizing that the Gandhi/Nehru family is the heart and
soul of Congress and party members will accept anyone as
Prime Minister if he/she is selected by Sonia Gandhi.

The Political Consequences
--------------


15. (C) With the positive exception of the nuclear deal, the
overall national political trend is of a UPA government
incapable of taking dramatic initiatives or generating
political excitement or enthusiastic popular support. It has
become a party mired in its own mediocrity that draws up big
plans and big initiatives, but fails to back them up with
genuine commitment and effort. This has become apparent to
the voters and has been confirmed by the losing record of
Congress in recent elections. In the past year Congress has
faced electoral defeats in Bihar, Uttarakhand, Jharkhand and
now Uttar Pradesh, and is increasingly presenting a picture
of a party in the doldrums. Its only political consolation
is that the BJP is doing only a little better. The recent
victory of Mayawati and her caste-based BSP in UP is
indicative of a larger trend toward further regionalism. She
is now bent on repeating her success in other states and
capturing more MP's in the 2009 Parliamentary elections. As
the BJP and Congress run out of energy, the political vacuum
is filled by regional parties such as the BSP. Should
Congress fail to meet the Mayawati challenge, her followers
could become increasingly energized and ambitious. In the
media, reports are starting to appear that Mayawati will not
stop until she becomes Prime Minister.


16. (U) Visit New Delhi's Classified Website:
(http://www.state.sgov.gov/p/sa/newdelhi/)
PYATT