PUNJAB: BELLWETHER STATE CAUGHT BETWEEN CONSUMER

UNCLAS SECTION 01 OF 05 NEW DELHI 002829

SENSITIVE
SIPDIS

DEPARTMENT FOR SCA/INS, DRL

E.O. 12958: N/A
TAGS: PGOV PHUM PREL PINR KDEM IN
SUBJECT: PUNJAB: BELLWETHER STATE CAUGHT BETWEEN CONSUMER
BOOM AND RURAL SLUMP

REF: A. NEW DELHI 6868

B. NEW DELHI 2556

C. NEW DELHI 2631


1. (SBU) SUMMARY: Punjab remains the richest state in
India with its historically strong agricultural sector, and
nascent real estate and industrial sectors. However, there
are signs of decline in Punjab as other states surge ahead.
Its long-held claim to highest per capita income in India has
been ceded to neighboring Harayana. Moreover, its human
development indices in education and health are comparable to
some of the most backward states in the Union. The ruling
Shiromani Akali Dal (SAD) - Bharatiya Janata Party (BJP)
coalition government, under the leadership of Chief Minister
Parkash Singh Badal, is seen by many observers we spoke to as
oblivious to issues plaguing the state, including
unemployment, rampant drug use and inflation. In the run-up
to Lok Sabha elections due by May 2009, national issues such
as the economy and terrorism will be front and center, but
underlying concerns about the direction Punjab is heading
will also loom large. END SUMMARY.

PRE-ELECTION BELLWETHER COVERAGE: PUNJAB
---


2. (U) The coming Lok Sabha elections due by May 2009 will
represent the world's largest exercise in democracy. They
will also pose a monumental organizational challenge for the
Indian state, which must prepare for about 650 million
eligible voters. Ahead of national elections, the Mission's
POL and ECON sections will take the political and economic
temperature of key states. The pre-election bellwether
coverage will zero-in on local trends in Uttar Pradesh,
Punjab, Maharashtra, Andhra Pradesh, Tamil Nadu and West
Bengal. We hope these reports will give Washington readers
better insight into: a) the vast India that lies outside of
Delhi's Ring Road; b) parties and personalities that shape
India's political landscape; and c) the economic, security
and social trends that will influence elections results.
Such snapshots will give us a better sense of how local
trends affect national politics and, ultimately, U.S. foreign
policy goals.


3. (U) During four days of meetings in Punjab (one of the
"bellwether" states) from October 13-16, we met with senior
bureaucrats, journalists, businessmen and human rights
activists. We spent time in Chandigarh, Amritsar and in
rural areas outside of Jalandhar.

SLOW GROWTH DESPITE AN URGE TO SPEND
---


4. (U) A gleaming BMW slowly turns the corner on Madhya
Marg, the main avenue of Punjab's capitol city Chandigarh.
The driver, Kanwar Dhillon, has one of the hottest rides in
town: a BMW 5 Series worth USD 86,000. A self-proclaimed
"car freak," Kanwar is the America-educated son of Congress
Party MLA Kewal Dhillon. The state's thriving luxury car
market underscores one of the many contradictions in Punjab's
social and economic landscape. While it remains one of
India's largest luxury markets, its GDP was six-percent this
past year, making it one of the slowest growing states in
India, while the agricultural sector has stagnated at
two-percent growth for the last five years. When driving
from Chandigarh to Amritsar, it seems that that every major
city features at least one modern shopping center selling
up-market western brands. Kanwar believes that Punjabis'
love for luxury goods is intrinsically linked to their
consumption-driven culture. "Punjabis are colorful people.
We buy more, socialize more and like the finer things in
life," he remarked. (NOTE: Such conspicuous consumption is
also likely a result of the large amount of remittances that
go to Punjabi families from relatives working abroad. End

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Note.)


5. (U) Special Correspondent for The Tribune Ashok Sethi
shared more critical views. In his opinion, the booming
luxury goods market is a clear indication of growing income
disparities in the state. Differences between booming urban
centers and troubled rural areas are also at the center of
the debate about Punjab's relative decline. Agriculture has
long been the basis of Punjab's wealth. However, the
agro-business sector remains weak despite the impressive crop
yields after record-breaking monsoon rains this past year.
Farmers are over-burdened with bank loans to purchase
tractors and pay loans owed to landlords, which has led to
increased rates of suicide across the farm-belt, Sethi noted.

HOW ARE YOU GOING TO KEEP THEM DOWN ON THE FARM?
---


6. (SBU) Congress Party MLA Sukhpal Singh Khaira has seen
first-hand the "vicious cycle" of debt and under-development
in Punjab's rural farming communities. Speaking from his
ancestral home in Bholath, located one hour north of
Jalandhar, he noted that farmers are uneducated, unorganized
and unable to break out of debt. Under pressure from the
powerful agricultural sector, the Congress party under the
leadership of ousted Chief Minister Amarinder Singh had
promised debt forgiveness to farmers in the run-up to the
February 2007 state assembly elections. They lost and the
current Shiromani Akali Dal (SAD)-Bharatiya Janata Party
(BJP) coalition government, Kaira indicated, did not pursue
the Congress initiative. Chief Minister Parkash Singh Badal
is "all talk when it comes to real development, and people
are desperate for help," he charged. Kaira and his village
constituents have taken to the streets in protest of alleged
government negligence of the rural sector. Just days before
our meeting, Kaira and 100 supporters staged a sit-in at a
SAD office and were taken into police custody over-night.

DISAPPOINTING SAD-BJP DEVELOPMENT RECORD
---


7. (U) Not all the news from Punjab is negative. The
current coalition government can point with pride at the fact
that for the sixth consecutive year, Punjab has been ranked
the "best state" by leading magazine India Today's 2008 State
of States Survey. The state boasts the highest per capita
generation of electricity in India at 2.5 times the national
average. Punjab's road, rail, air and transport systems are
routinely rated the best in India and, as a result, it has
become an attractive destination for foreign companies
looking to establish Indian operations (Ref. A). We saw a
plethora of major road projects throughout the state - from
the planned city of Chandigarh, to the industrial town of
Jalandhar, to the religious and cultural center of Amritsar.


8. (U) Punjab Information and Public Relations Minister
Bikram Singh Majithia noted that the state government is
working to connect Punjab to the rest of the country, and to
upgrade infrastructure to world-class standards. There are
more than 100 domestic and international flights everyday,
and major airport renovation projects are underway in all
major cities. Majiithia, however, admitted that industrial
development continues to lag, as Punjab is a land-locked
state that lacks natural resources. He also pointed out that
tax concessions in neighboring states, particularly Himachal
Pradesh and Haryana, have diverted private investment thereby
hindering the industrial sector's growth.


9. (SBU) There are other worrisome trends. According to
the India Today survey, the state's long-held claim to
highest per capita income has been ceded to neighboring
Harayana. Moreover, it human development indices in
education and health are comparable to some of the most

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backward states in the Union. Vijay Chopra, Managing Editor
of several local vernacular newspapers, noted that "no
meaningful projects" have been initiated in the education and
health sectors under CM Badal's watch. MLA Kaira lamented
that the rapid rise of private players in health and
education has made the government complacent in financing
public sector institutions. While the middle and upper class
Punjabis have benefited from the growth of the private sector
hospitals throughout Punjab, public hospitals lack basic
resources, such as beds and sanitary medicals supplies.
Kaira called on the SAD-BJP government to create incentives
for attracting quality public sector doctors and nurses, and
to invest in government health care infrastructure. In
reference to education, he indicated that most working class
children drop out of school at fifteen. In his opinion,
rural youth prefer to work rather than pursue higher
education because of the poor quality of instruction and the
general lack of resources in public schools.


10. (U) Chopra added that the basic infrastructural
framework needs a major overhaul, noting that the Punjab
national highway in rural areas has not been upgraded since
the 1970's. The government has focused on "showy" road
works, such as overpasses in major cities, and has failed to
address the infrastructure in small cities and rural areas,
he said. We saw this first-hand en route to MLA Kaira's
village in Bholath. The main roadway in rural Western Punjab
remained rough and uneven throughout, and we observed few
signs of commercial development.

DRUGS, THE NUMBER ONE SOCIAL PROBLEM
---


11. (U) Several contacts raised the issue of rampant drug
use as the number one social challenge facing the state. The
Director General of Punjab Police N.P.S. Aulak mentioned that
the problem has worsened in the last ten years and affects
people from all income brackets across the state. He
indicated that police forces have stepped up drug enforcement
in railway stations, airports and along the Pakistan-India
border. On October 9, DG Aulak noted that Amritsar Airport
Police had seized 3.7 kilograms of heroin worth more than USD
1 million from an elderly couple.


12. (U) Herkewaljit Singh, Editor of the local vernacular
newspaper the Daily Ajit, blamed unemployment for rising drug
abuse. With a stagnant agricultural sector, and limited
employment opportunities in private companies, many young
Punjabis have turned to the drug trade to make a living, he
added. Drug use in rural Punjab is on the rise, Singh
pointed out, where farmers use drugs to "dull the pain" of
debt and to deal with the isolation of rural life. In his
view, the SAD-BJP government has not implemented an effective
anti-drug campaign. He contended that the state government
should dedicate sufficient resources and political support to
investigate criminal drug links. In addition, Singh called
on the SAD-BJP to employ an outreach program to educate the
public about the harmful social and health effects of drugs.

BADAL FAILS TO DELIVER
---


13. (SBU) Even nonpartisan sources we talked to were
critical of CM Badal's government as unresponsive to issues
affecting the everyday lives of Punjabis. Backed by rural
castes and the Sikh community in February 2007, the SAD-BJP
coalition came to power on a populist agenda to lift up those
left behind in Punjab's boom (Ref. A). In reality, Badal's
government has failed to deliver any semblance of meaningful
development and, according to Vijay Copra and Ashok Sethi,
Punjabis are worse off now than they were one and one-half
years ago under the previous Congress-led administration.
MLA Khaira alleged that the SAD-BJP is trying to enhance its

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image by taking credit for development projects, such as
public school and roadwork projects initiated during the
previous Congress-led administration.


14. (SBU) Sources also noted that the coalition government
faces a leadership crisis. According to Chopra, CM Badal has
abdicated authority to his son Sukhir Singh Badal, noting
that Sukhir regularly serves in an official capacity at
development project inaugurations and other state events.
"It's like a plane with no pilot. Who is in charge, Badal or
Badal Jr.?" he inquired. Ashok Sethi suggested that the
SAD-BJP's poor development record may provide an unexpected
boost for the Congress Party in upcoming elections.

LOOKING AHEAD TO 2009 ELECTIONS
---


15. (U) Amid the global financial crisis and liquidity
shortage in the domestic market, economic issues will feature
prominently in national election next year. During a meeting
with local Jalahndar business and community leaders on
October 14, all 16 representatives agreed that the economy
would be the priority issue in upcoming elections. Bawa
Atamjit Singh, managing director of a local leather tannery
factory, went into detail about the rise in production costs
under the Congress Party-led United Progressive Alliance
(UPA) government and worried that he may be forced to layoff
employees. "We want to know what the government is doing to
bring down prices," Singh demanded. MLA Khaira in an earlier
meeting explained that spiraling food and commodity prices
are a "global problem" that cannot be fixed overnight. He
pointed to Congress-led policies such as the national rural
employment scheme and debt waivers that will help to ease
pressures on the common man.


16. (U) Meeting with us days after the 123 Agreement
signing on October 10, contacts spoke positively about the
U.S.-India Civil Nuclear Initiative and its long-term
benefits for the bilateral relationship. Vijay Chopra noted
that it was one of the most significant foreign policy
initiatives in India's history and that it will fundamentally
change the country's global future. Business and community
leaders in Jalahndar were hopeful that nuclear trade would
help address the local need for alternative energy resources.
However, most contacts agreed that the government has not
reached out to the rural community and explained the
widespread benefits of Civil Nuclear Cooperation. In order
to gain political leverage in time for national elections
next year, contacts called on the UPA to enlist a
broad-reaching public relations campaign to educate the local
community about alternative energy, nuclear power and the
implications for the local consumer.


17. (SBU) The emerging terrorist threat, following the
serial terrorist blasts in Indian regional centers from July
to September 2008, has emerged as a possible liability for
the UPA in forthcoming elections. There has been
considerable internal debate among Congress Party officials
and UPA allies on whether to enact stronger terror-fighting
legislation (Ref. B). Vijay Chopra alleged that UPA
"internal fighting" on the issue is to be expected, adding
that senior leaders will not take a "political risk" to make
a decision on controversial issue. The party spokesmen
release statements "promising everything under the sun" to
earn political brownie points from strategic vote banks, he
added.

PUNJABIS CONDEMN COMMUNAL POLITICS
---


18. (SBU) Contacts observed that the Bharatiya Janata Party
(BJP) will suffer setbacks due to their "communal agenda"
targeting Christians in Orissa and Karnataka (Ref. C).

NEW DELHI 00002829 005 OF 005


Punjab Minister of Cooperatives Captain Kawaljit Singh noted
that Punjabis have no tolerance for communal violence after
decades of insurgency (Ref. A). "When minorities from other
communities are attacked, it touches a soft nerve in the
state," he commented. No contacts expressed concern of
communal tensions remerging in the Punjab. Compared to other
parts of India, Herkewaljit Singh observed that people of
different religious and migrant labor communities live
peacefully together. Punjabis seem more concerned about
issues that affect their daily lives, such as development,
economic stability and employment, he said.

COMMENT: BADAL NEEDS TO KICK IT UP A NOTCH
---


19. (SBU) The SAD-BJP government has portrayed itself as
the government of the people, but it has yet to convince
Punjabis that it is responsive to popular desires. While
Punjab remains the richest state in the Union, it is losing
competitive advantage across all sectors. Agricultural
reforms are moving at a tortoise pace. Private industries
have fled to neighboring states. While economic progress has
been reported in some sectors, Punjabis fear that the global
financial crisis and inflation may cloud investors'
confidence. Moreover, the ruling government is seen as
oblivious to issues that affect Punjabis' daily lives, such
as unemployment, drug use, health and education. With just
over three years remaining in the current state government
administration, Badal will be hard pressed to meet the
expectations of the Punjab electorate. He will have to
devise an effective outreach strategy to convince local
Punjabis that SAD-BJP is responsive to local needs or risk
losing political capital to the rival Congress Party.

COMMENT: ECONOMY AND TERROR TOP 2009 POLLS
---


20. (SBU) In the run-up to national elections next year,
the UPA's response to perceived economic instability and the
resurgent terrorist threat will be closely watched by local
Punjabis. To address economic fears, the UPA will seek to
generate positive buzz by pointing to the historic run of
economic growth and by projecting India's global future
following the successful passage of the U.S.-India Civil
Nuclear Initiative. In addition, the UPA will have to walk a
fine line to appear tough on terror while not alienating its
Muslim constituency. END COMMENT.
MULFORD