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Last Updated: Friday, 11 May 2007, 15:20 GMT 16:20 UK
India's reform programme suffers a blow
Sunil Raman
BBC News, Delhi

Members of India's governing left-of-centre coalition, the United Progressive Alliance (UPA), have suffered a string of electoral defeats since taking power in 2004.

Celebrations for the BSP victory
The BSP managed to broaden its appeal this time round

And now on Friday comes further bad news for its principle party, Congress and the influential Gandhi-Nehru dynasty.

Whatever hopes it may have had to regain ground in Uttar Pradesh (UP), the country's biggest and most politically important state, have been dashed. In fact it has lost ground in UP again.

Since 2004, Congress has lost power state elections in Punjab, Uttarakhand and Kerala.

It has also done badly in municipal elections in states it rules, Andhra Pradesh, Maharashtra and Delhi.

Friday's poor showing in UP provides more evidence for those predicting further reverses for Congress in Gujarat later this year.

'Reforms stalled'

So what does this mean for the central government's ambitious economic reform programme, based on a prediction of 10%+ economic growth?

Outside a Congress party office
There was a sombre mood at Congress offices

Does the economist Prime Minister, Manmohan Singh, have political space to push for further reforms?

The editor of one of India's leading business dailies, The Business Standard, AK Bhattacharya, is among the pessimists. He argues that the reform process "had in any case stalled. The problem for reforms in India is not outside the (governing) UPA but inside the UPA. A defeat in UP will see the situation worsen further".

Mr Bhattacharya says crucial reforms will suffer. These include:

  • Pension changes that would benefit millions of workers in the unorganised (non-unionised) sector besides those in the organised (unionised) sector
  • Amendments to the Insurance Bill
  • Several policy decisions dealing with the rehabilitation of people displaced by economic projects such as Special Economic Zones
  • Banking sector and legal reforms
  • The implementation of VAT at state level.

The basic problem facing the ruling Congress Party has been its inability to widen its electoral base in the country, three years since coming to power with the support of several regional parties and the communists.

A coalition of social groups that the Congress forged after Independence in 1947 helped the party retain power in UP and at the national level for over four decades.

But that has now been hijacked by the Bahujan Samaj Party (BSP). Led by the populist Mayawati, the BSP is a party that was formed to champion the cause of Dalits, who are right at the bottom of the Hindu social order.

However, the BSP has now succeeded in winning the support of all social groups including Muslims in Uttar Pradesh.

And that is reason enough for Congress to worry.

'Status quo'

Every electoral loss leads the anti-reformists in the Congress to demand the slowing down of reform measures.

BJP office
The BJP failed to muster a threat in UP

The bureau chief of The Times of India, Diwakar, highlights the failure of the Hindu right, led by the Bharatiya Janata Party (BJP), to stop its reverses in UP.

A resurgent and threatening BJP, he argues, would have helped the Congress appeal for greater discipline and unity within the ruling UPA coalition.

"UPA government ceased to function a year ago," says Diwakar. "from now onwards do not expect any major announcement that would take India further on the road to globalisation. It will be status quo till 2009."

Under that scenario, the left-wing parties in the governing coalition will be applying the brakes whenever the government seeks to push its reformist agenda.

'Serious problem'

Communist Party of India(Marxist) MP Sitaram Yechury says there is a "growing hiatus between shining India and suffering India", referring to growing divide between urban and rural India.

Mr Yechury believes the UPA government needs to focus on agriculture and rural India otherwise "winning (parliamentary) elections in 2009 will be a serious problem".

Rising inflation, a fall in the employment growth rate and rising home-loan rates have impacted on a large number of Indians.

The UPA came to power in 2004 on the promise that it would focus attention and provide a bigger share of resources to the vast majority Indians, that is, the poor.

Some decisions, like a job guarantee programme for rural people when rains fail and a law to give land rights to 100 million tribal people are widely seen as progressive moves by Prime Minister Manmohan Singh's government.

On the other hand, efforts by senior Congress ministers to woo retail giants like Walmart, moves to allow Fortune 500 oil company Reliance Industries to acquire vast areas of farm land for Chinese-inspired Special Economic Zones and attempts to open the country to foreign legal firms and foreign universities are seen as moves that would not politically help the UPA, particularly the Congress Party, to turn round its electoral misfortunes.

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