BHARAT BALLOT 09: CONGRESS COMEBACK IN WESTERN INDIA

UNCLAS SECTION 01 OF 03 MUMBAI 000198

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E.O. 12958: N/A
TAGS: KDEM PGOV PINR IN ECON EFIN
SUBJECT: BHARAT BALLOT 09: CONGRESS COMEBACK IN WESTERN INDIA

REF: BHARAT BALLOT SERIES

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1. (U) Summary: In the 2009 national election in western
India, the Congress Party gained seats in Madhya Pradesh and
Maharashtra, along the lines of national trends. The Congress
lost only one seat in Gujarat, much less than was expected. The
Congress hopes that the momentum in Maharashtra will carry the
party through the upcoming state Assembly elections, and make
them less reliant on the ally - but sometimes rival -
Nationalist Congress Party in the state. Observers believe that
Gujarat Chief Minister Narendra Modi's campaigns in western
India did little to help the Bharatiya Janata Party's fortunes,
confining his impact to his state. Buoyed by the Congress
victory, equity markets in Mumbai surged at the prospect of
continued economic reforms and policy continuity. End Summary



Maharashtra: Congress Gains, but Thackeray Surprises

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2. (U) The Congress Party gained four seats across Maharashtra,
sweeping all six Mumbai seats, and won back seats in both rural
and urban districts. The BJP lost four seats, and its regional
party, the Shiv Sena, lost one. The three independents who won
seats are likely to ally with the Congress-led coalition in New
Delhi. The Congress gains in rural Vidarbha were seen as
recovering seats in rural or tribal areas traditionally held by
the Congress, in large part due to farmer debt-relief programs
and other aid offered by the United Progress Alliance (UPA)
administration.




3. (U) The strongholds of Sharad Pawar and his Nationalist
Congress Party (NCP) in the sugar growing regions of western
Maharashtra appear to be fading. The NCP won only five out of
ten districts in this region, including seats for himself and
his daughter. Overall, the NCP lost one seat, down from nine to
eight, leaving Pawar and his party in a weak bargaining position
for central ministries. He had estimated that the Congress
tally nation-wide would be smaller than 2004, and that he and
other secular leaders could wring out more concessions from the
Congress, including more important portfolios, which is now
unlikely to happen.




4. (U) Several of the Congress gains were credited to the strong
showing of Raj Thackeray's three-year-old Maharashtra Navnirman
Sena (MNS) party that attracted Marathi-speaking voters and
pulled votes from Shiv Sena and BJP candidates. The impressive
MNS tally surprised many observers; analysts and Shiv Sena
politicians estimated that the MNS would not make an impact in
this election because it was riding on the media-hype around Raj
Thackeray's controversial anti-North Indian utterances and had
no grassroots organization. However, MNS candidates - many of
whom were political newcomers -- garnered more than 100,000
votes in each of the 12 districts where it fielded candidates,
coming in second in two seats (including the prestigious South
Mumbai constituency). The strong showing by the MNS signals
trouble for the Shiv Sena in the state Assembly elections in
September. The Samajwadi Party contested two seats in
Muslim-dominated urban constituencies, but its candidates lost
their deposits in both seats, which means that the Muslims
decided strategically not to waste their votes on non-Congress
parties.



Congress Gains in Madhya Pradesh

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5. (U) In Madhya Pradesh, the Congress gained seven seats to
hold 12, despite the far better organization of the BJP's
political machine in the state. While the BJP still dominates

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in the state with 16 of the 29 seats, its vote share has
significantly diminished, as it did in the state Assembly
elections in November 2008. Mayawati's BSP picked up one seat
along the border with Uttar Pradesh. BJP officials expected
losses heading into the elections, but the results were more
startling than they had projected. Political observers credited
individual candidates for each gain, but rural economic relief
programs of the UPA administration no-doubt paid dividends as
well. One BJP star in the state, Sushma Swaraj, who ran
virtually unopposed when her Congress opponent failed to get on
the ballot, was rumored as a potential future leader for the
national party. While favored by some because she is not
tainted with the history of sectarian violence that hurt L.K.
Advani and Modi, she declined to vie for the position, deferring
to Advani.



-Gujarat: Modi-Magic on the Wane?

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6. (U) Despite Congress's sweep nationwide, the BJP still
managed to add one seat to their tally in Gujarat from 2004,
several less than expected. Both the BJP and the Congress
slightly lost vote share. The results disproved the claim of
Gujarat Chief Minister Narendra Modi's supporters that he could
get any candidate elected - half of the new faces Modi had
nominated lost their bids. Pundits report that Congress
benefitted in Gujarat from the nationwide positive feelings
towards PM Manmohan Singh, staving off a worse defeat there.
Widespread support for Manmohan Singh to continue as PM was
noted by Mumbai's Congenoffs even among the pro-BJP business
communities in Gujarat.




7. (U) Modi's widely touted rallies and a semi-national campaign
appears to have made little dent in the BJP's fortunes. Despite
holding public rallies in 20 constituencies in Maharashtra, NDA
candidates won in only three of those districts. Observers in
Madhya Pradesh also expressed concern that Modi was too
autocratic and too Modi-centered, leaving no room for others in
the party.



Financial Markets Celebrate

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8. (U) Mumbai's newspapers roared "Singh is King," proclaiming
the victory of Prime Minister Manmohan Singh. Investors also
cheered at the prospect of a stable government, and drove
equities markets sharply upwards at the opening bell on Monday,
May 18, tripping regulatory "circuit breakers" designed to
hamper rapid fluctuations in the market. The Bombay Stock
Exchange saw the sharpest one-day rise ever in its history,
sky-rocketing 2111 points, 17.3 percent, and the National Stock
Exchange rose 17.7 percent, also a record-breaker. The
Hindustan Times predicted the soar before markets opened,
arguing that the Congress would now be able to provide stable
government and push through economic reforms that were
previously held hostage by the Left and other UPA allies. Salim
Gangadharan from the foreign exchange department at the Reserve
Bank of India noted that given the overwhelming victory, the
market reaction was no surprise. He expected that markets would
continue to rise - as would the rupee, appreciating due to
foreign capital inflows.




9. (U) Comment. Despite reports from Madhya Pradesh and
Maharashtra that the Congress Party was not well organized,
their candidates pulled off significant victories in
district-by-district campaigns. The popularity of UPA programs
to help farmers and other poor appear to have been key weapons

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for the Congress, judging by the districts where they regained
turf.

Investors also cheered the return of PM Singh and the Congress
Party, and hopes for policy continuity and more economic reforms
are high. For regional leaders like Modi and Pawar, this
election has come as a setback, signaling that their popularity
has, for the time being, plateaued. We will be watching to see
whether the gains made by the MNS can be duplicated or improved
upon in the Maharashtra Assembly elections this fall. End
Comment.
KAUFFMANEC