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Page last updated at 10:03 GMT, Friday, 22 May 2009 11:03 UK

India's PM faces tough agenda

By Paranjoy Guha Thakurta
Indian economic analyst

An Indian farmer
The Congress party's pro-poor policies paid off in the election

As the new Indian government is sworn in, it is clear it will have to confront major challenges to revive its sagging economy.

The fact that Prime Minister-elect Manmohan Singh is a renowned economist will certainly help the world's largest democracy counter an economic slowdown.

What will benefit the leadership of the Congress party (to which Mr Singh belongs) even more is that the country's centre-left "grand old party" is leading a coalition government with a comfortable majority.

Congress alone has 206 MPs out of the 543 in the Lok Sabha or lower house of parliament.

Whereas political analysts had anticipated a fractured mandate, Indian voters delivered an unexpectedly decisive one in the country's 15th general election, the outcome of which became known last Saturday.

Slowing economy

Aged 76 and having undergone a recent heart bypass surgery, Mr Singh was formally elected by his party's lawmakers as their leader on Tuesday after elections that were spread out over five phases in a blistering hot April-May, the biggest exercise of its kind on the planet.

In his acceptance speech, Mr Singh said that among his main tasks was the challenge to revive the economy, create jobs and ensure that the benefits of growth reached the underprivileged in the world's second-most-populous nation state.

PM Manmohan Singh with Sonia Gandhi
Congress has the benefit of a large electoral mandate

"There is some slowing down of investment and employment generation. We have to revive growth and make it even more inclusive," he said as party MPs thumped their desks in the central hall of parliament in Delhi.

The Indian economy, after having grown by a record 9% four years in succession for the first time since the country became politically independent in 1947, has slowed down to 6%-7% over the past year or so.

Industrial production has declined and exports have fallen by one third.

Millions of jobs, especially in export-oriented industries such as textiles, garments, gems, jewellery, leather and handicrafts, have been lost in recent months as recession-hit Western markets for such products have disappeared.

Whereas India is the second-fastest growing economy in the world among large countries after China, a substantial section of the country's 1.1 billion people is extremely poor - at least one out of four survives on less than $1 a day and more than two out of three Indians live on $2 a day.

"The five years in front of us could well be a decisive half-decade," Mr Singh said on Tuesday.

He added: "If we can sustain the growth rates of the last five years, we can reduce poverty, create new employment, accelerate rural development and industrialisation and transform the lives of our people... We must grasp the nettle firmly and forge ahead."

Agricultural successes

The rate of growth of India's economy picked up from the early-1990s after a phase of "liberalisation" and reduction of controls that had been presided over by Mr Singh who became finance minister in an earlier Congress government after a long stint as a technocrat and academic.

Despite the market friendly policies pursued by Mr Singh and some of his colleagues, there is a substantial section in the Congress party that remains wedded to the party's socialist past.

A Calcutta mall
Mr Singh has made economic recovery one of his key concerns

After Mr Singh became prime minister for the first time five years ago, his administration was attacked by his political opponents on the right (that is, the Hindu nationalist Bharatiya Janata Party) as well as the Left (namely, the Communist parties that withdrew support to the government last July over the nuclear deal with the United States).

However, the just-concluded elections have made both right and left considerably weaker after a mandate that is widely perceived to have been in favour of centrist policies and political stability.

The challenge for Mr Singh's government will be to meet the aspirations of India's youthful and upwardly mobile middle classes while widening social safety nets for the poor, specially those living in rural areas.

The pre-election manifesto of Congress has promised subsidised cereals for the poor.

The first Singh administration had written off agricultural loans worth 700bn rupees ($15bn) and also initiated a legally guaranteed employment programme for 100 days in a year for families in rural areas, both of which have apparently paid the Congress rich electoral dividends.

Troubled neighbourhood

In many respects, the tasks that lie ahead for the newly-elected regime are evident and these are to revamp the country's inadequate social infrastructure (notably basic health-care, sanitation and primary education) as well as its rickety physical infrastructure (electricity, drinking water facilities and roads).

Protesters from Amnesty International stand around a portrait of Aung San Suu Kyi in Hong Kong on May 21, 2009.
Burma is one of many less-than-stable neighbours

On the foreign policy front, Mr Singh will have to deal cautiously with neighbouring Pakistan and Afghanistan, where Islamic fundamentalists are threatening to overrun both countries.

In Sri Lanka, the quarter-century militant movement to create a new nation for ethnic Tamils living in the northern part of the island may have been finally crushed by the military, but problems of providing humanitarian assistance for thousands displaced by the conflict continue.

Governance in another country neighbouring India, Nepal, is yet to stabilise after the Maoists withdrew from government following differences with army bosses.

In Burma, the military junta remains firmly entrenched despite periodic outbursts of protest from pro-democracy forces that have rallied around Nobel peace laureate Aung San Suu Kyi, who has been under house arrest for more than a decade.

Among India's neighbours, Bangladesh is arguably the most politically stable after the pro-India Awami League was elected to power with a sweeping majority in December.

In order to ensure political stability in a restive subcontinent while protecting India from the worst ravages of the ongoing worldwide economic crisis, Manmohan Singh has more than enough on his plate as he commences his second term as prime minister.



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