Jul 3, 2008

India - Manmohan singh's burning ambition

IN FOUR years as India’s prime minister, Manmohan Singh has come to resemble a bearded and turbaned Aunt Sally. A more quarrelsome government than his would be hard to recreate: it comprises his centrist Congress party and a dozen small leftist and regional outfits, and relies for a parliamentary majority on the “outside” support of India’s Communist parties. And Mr Singh has little control over this mutinous mix; his party boss, Sonia Gandhi, the Italian-born widow of a murdered Congress leader, runs the show. This arrangement has assured Mr Singh many brickbats, and little freedom to dodge.
But ahead of the latest volley—at “crisis” talks between the government and Communists on June 25th—Mr Singh allegedly threatened to up his stake and quit. At the least, he appears to have lobbied Mrs Gandhi hard on behalf of a controversial policy that caused the crisis: a civil-nuclear co-operation agreement with America, forged by Mr Singh and President George Bush in 2005. This pact, which still needs approval from other countries involved in nuclear issues and a final sign-off by America’s Congress, would provide energy-starved India with nuclear fuel and technology that it badly needs, without forcing it to submit to the strictures of the Nuclear Non-Proliferation Treaty (NPT). An unprecedented recognition of India’s nuclear-armed status and its international importance, this promised to be Mr Singh’s greatest achievement in foreign policy, or indeed in anything else.
But the Communists, anti-American to their sandalled feet, loathe it. If, as the next stage in an approvals process that is already far behind schedule, the government submits the deal to the International Atomic Energy Agency (IAEA), the UN’s nuclear guardian, the Communists say they will forsake it. This week’s meeting was, as it turned out, the government’s latest unsuccessful attempt to dissuade them. Another meeting is due in a fortnight.
So the government appears to have an uncomfortable choice. It can abandon the deal, which would be embarrassing. This would suggest that India is unable to honour the terms of a simple bilateral agreement—even one stacked in its favour. Or else the government can press ahead with the deal, and risk being reduced to a parliamentary minority, unable to pass legislation, and vulnerable to a vote of no-confidence. An election, due by May 2009, might ensue towards the end of this year.

If this transpires, the government might nonetheless salvage the deal, though it would be awfully tight. As a dying act, it could submit the agreement to the IAEA’s board, and hope that fair winds and American stewardship see it through. The IAEA would probably approve the pact. The 45-member Nuclear Suppliers’ Group (NSG), its next destination, might prove stickier.
Several NSG members, including Austria and Ireland, are concerned about the deal’s ramifications for the anti-proliferation effort. China, which reasonably suspects America of trying to plump up India as a counterweight to its own rise, may also want to scupper it. It will take time and muscular American influence to override these obstacles—and, in the dying days of Mr Bush’s administration, both are likely to be in short supply.
Indeed, it is possible that the NSG might approve the deal, but leave the American Congress too little time to debate it before Mr Bush quits office on January 19th. That could even leave every NSG member except America jostling for lucrative nuclear contracts with India, with France and Russia at the head of the pack.
Plainly, if the deal is to be done, it needs doing quickly. So why, after his alleged flutter of derring-do, is Mr Singh not risking more to push it through? After all, even the government’s worst fear, an early election, would cost it only a few months of its term. Only he and Mrs Gandhi may know the answer. Yet it is clear that for Indian parliamentarians, more than two-thirds of whom can expect to lose their seats in the coming election, a few more months matter greatly. And the nuclear deal, an example of the sort of highfalutin foreign policy that bothers only a few high-powered ministers, journalists and others in India, may not matter much. Moreover, having once been shy of facing an election, Congress and its partners are suddenly terrified.
Driven by high-cost oil, inflation has leapt to 11%—the highest rate in over a decade (see chart). Food prices have risen especially fast, so that inflation disproportionately hurts poor Indian voters, ie, the vast majority of them. On June 24th the central bank raised its main lending rate to 8.5%—another recent record high—in response. There is little else the government and its servants can do. Recent buoyant revenues, fruits of 9% annual economic growth, have been poured into vast welfare schemes: to employ rural paupers, forgive loans to small farmers, and so on. With a gaping budget deficit to worry about (by one forecast 9.4% of GDP this year), the government has little cash to spare for the inflation-afflicted.
This is excellent news for Congress’s main rival, the Hindu-nationalist Bharatiya Janata Party (BJP). It was until recently stricken by a surprising election defeat in 2004. But since naming L.K. Advani, an octogenarian bruiser, as its prime-ministerial candidate last December, the party has been perking up. A string of state election victories—including in May in Karnataka, the first southern state to elect a BJP government—has also spread cheer in its well-drilled ranks. Surging inflation, along with an expectation of slower economic growth, has furnished the party with a potentially election-winning issue. Raising fears of the Muslim bogey—the BJP’s preferred manifesto topper in some states with a history of communal tension—does not fly in the relatively pacific south. But slamming Congress for, say, squandering the wealth that BJP policies did much to create, might serve it well everywhere.
Against the threat of diplomatic humiliation and election defeat, the government seems, Micawber-like, to be hoping that something will turn up. Its prayers are mostly for a bumper autumn harvest, to rein in food-price inflation towards the end of the year. This would be a blessing for India’s poor millions. But with prices sure to stay high, it might not convince many of this government’s merits. That would surely take altogether more decisive leadership—of a kind that America thought it had identified in India, and rewarded

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