Biggest questions to focus on economic policy

HONOLULU (May 14) -- The outcome of India's 14th general elections, in which  the ruling National Democratic Alliance (NDA) was defeated by an alliance led  by the once-dominant Congress Party, was a big surprise to most election  watchers. The reasons for the NDA's defeat are complex, said Arun Swamy, an  East-West Center specialist on South Asia, but a key factor was the ability of  the Congress Party to form alliances before the election.

Indications for some time had shown that the tide was turning against the NDA  and its leading constituent, the Bharatiya Janata Party (BJP). While early  opinion polls forecast a landslide victory for the NDA, later ones suggested  that the government would come back with a bare majority in parliament. (272 seats are needed for a majority). Subsequently, exit polls after each phase  of the four-phase election process made it clear that the NDA was going to  lose its majority.

What was not expected, Swamy said, was that the NDA's final seat tally of 185  would drop well below those of the Congress and its pre-election allies (217),  while the Congress Party itself, with 145 seats, edged out the BJP (138) to  become the single largest party in parliament for the first time since 1996.  With the remaining 137 seats going to parties that mostly prefer the Congress  Party to the BJP, most notably the two communist parties and a socialist party  from northern India, the next government is almost certainly going to be  formed by the Congress Party.

As many commentators have suggested, the ruling alliance's emphasis on issues  that appealed to the urban middle class left the poorer and rural voters  unimpressed. In several key states the NDA, where it had done well in the past,  was almost wiped out, among them the largest state, Uttar Pradesh, and two big  southern states. However, there were many regions where the NDA improved its  performance over the last election. In many of these regions, the Congress  Party was in power locally, or had been in power until recently. This  suggests, Swamy said, that voters tended to vote against the party in power  locally, whatever that party was.

Moreover, the key to the election, Swamy said, was the ability of the Congress  Party to form alliances before the election. In India's electoral system,  where many parties compete but one can win seats even with a low percentage of  the votes, parties that come in second often win a much lower percentage of  the seats than their vote share. Differences in the Congress party's ability to form alliances often explained why the NDA was almost wiped out in some states but dramatically improved its standing in other nearby states.

The implications of the Congress Party's victory for the future of Indian  politics are many, Swamy said. The most obvious is that India's long-standing  political dynasty, the Nehru-Gandhis, are likely to return to office. Sonia  Gandhi, the Italian-born widow of Rajiv Gandhi, who served as prime minister  from 1984-89, is credited with having led the party to victory and could take  over as prime minister. Her son, Rahul, ran for parliament, while her  daughter, Priyanka, was an active campaigner.

Since becoming Congress Party president in 1998, Sonia Gandhi has been able to  unite the party's many factions, and revive the party's support among the poor.  However, in her first attempt to gain power in 1999, she alienated many potential  allies and, in the past many parties opposed to the BJP were also unwilling to  support Sonia Gandhi, owing to her "foreign origins." This time, however, enough parties seem to be willing to accept Sonia Gandhi as prime minister so that she can take over the office if she wants it. The decision is likely to be made by Monday.

If Sonia Gandhi does become prime minister, it is likely to galvanize the  right-wing BJP, Swamy said.  The BJP will otherwise be forced to debate  whether it lost because it pushed its divisive anti-Muslim agenda to the  background, or because hardliners, like those who carried out anti-Muslim  riots in the state of Gujarat, alienated moderate voters. Rallying against a  "foreign" prime minister could help overcome these divisions.

On the policy front, the biggest questions have to do with economic policy.  While it was the Congress Party that introduced economic liberalization in the  early 1990s, the Congress Party manifesto also expressed reservations about the  major remaining item on the liberalization agenda -- the privatization of state- owned firms. With the government likely to take support from parties on the left,  it seems likely that several major sales of state-owned firms to the public will  be put on the back burner for now, Swamy said. Indian stock prices have fallen  sharply in anticipation of this prospect.

The new government will also likely increase social spending, perhaps by  cutting defense spending. At the same time, Swamy said, there will be no  reversal of liberalization in the areas of business regulation or foreign trade as  there is a broad consensus on this, and the government will be able to find other  allies if they lose the support of the communists.

On foreign policy, there is likely to be little change. The Congress Party  will continue with talks scheduled with Pakistan but is no more likely to make  significant concessions on the disputed province of Kashmir than the BJP,  Swamy said. Indeed, with Sonia Gandhi's "foreign origins" being an issue, the  government will have little room to maneuver. A Congress government might, however, be more willing to grant greater autonomy to Kashmir within India.

On relations with the United States and the war on terrorism, there will also  be little change, Swamy said. It was the Congress Party that blocked efforts  to send Indian troops to Iraq and that insisted that the Indian parliament  condemn the U.S. invasion. The party will be even less likely to support U.S.  actions in Iraq than the BJP.

Arun Swamy can be reached at  or 808-944-7542.

The East-West Wire is a news service provided by the East-West Center in Honolulu. Any or all of this report may be used with attribution to the East-West Center or to the person quoted.

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