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Day of Reckoning
[q=http://www.ft.com/cms/s/0/6de5a252-5399-11dd-8dd2-000077b07658.html?nclick_check=1]A test of India's confidence in progress
When Manmohan Singh, India's prime minister, decided to push through a nuclear deal with the US last week, the response from his erstwhile communist parliamentary allies was immediate and to the point. "That time has come," said Prakash Karat, head of the Communist party of India (Marxist). The CPI (M) and its three leftist partners, which strongly opposed the nuclear deal on ideological grounds, withdrew their support in parliament for the ruling United Progressive Alliance coalition led by Mr Singh's Congress party.
This set the stage for a parliamentary vote of confidence next Tuesday that will decide the fate of the government. If the UPA can survive the vote and emerge with new, more reform-minded partners, the exercise could be the best thing that has happened to the government since it was elected in 2004. For India, it might also finally be a chance to bid good riddance to the communists and their stranglehold over the country's economic future.
The four main communist parties over the past four years have enjoyed that most privileged of positions: power without responsibility. The leftists have refrained from formally joining the governing coalition, instead using their 59 seats to provide the UPA with the majority it needs in the 543-member national parliament to stay in power. At the same time, they have used their position to exercise an effective veto over any UPA policy that did not fit with their ideology.
The result has been four years of policy stagnation that has left India flatfooted in the face of the economic downturn. On almost every front - infrastructure, reduction of expensive subsidies such as on fuel, or allowing foreign direct investment in retailing and education - the communists have advocated the status quo, even when this is woefully inadequate.
As one illustration, a paper on the CPI (M)'s website written in 2006 recommends stopping the privatisation of India's airports and leaving their modernisation in the hands of the state-run Airport Authority of India. This was despite the fact that after decades of government management, many of India's airports are among the shabbiest of any fast-growing economy in Asia. Without a substantial injection of private capital and expertise, they are unlikely to keep pace with soaring air traffic.
The same year, the leftists opposed an increase in retail fuel prices, recommending tax cuts instead. Yet if the government had started raising fuel prices more aggressively in 2006, it might have softened the impact of the present oil crisis. The surge in global crude prices has raised the cost of India's fuel subsidies to an unsustainable $60bn (¤37.8bn, £30bn) a year.
The communists also opposed foreign direct investment in retailing and some on the left have opposed corporate retailing altogether, arguing that it hurts small shopkeepers. This is despite the stimulus large chains could provide towards upgrading India's neglected infrastructure, to allow the rapid movement of produce and goods around the country.
The left has also been protective of India's arcane labour laws even though these have deterred many large-scale manufacturers from relocating to a country that offers one of the world's largest pools of workers. The Organisation for Economic Co-operation and Development last year cited the Industrial Disputes Act as one big problem. This does not allow companies with more than 100 employees to dismiss even one worker from a manufacturing plant without government permission.
As the analyst Mohan Guruswamy noted, the slow growth of manufacturing has resulted in an economy that has moved to a "post-industrial" services economic model without having industrialised. This favours the educated urban middle classes but has left hundreds of millions of semi- or unskilled rural workers stranded in poverty.
Other areas in which the left has dug in its heels include reforms to pensions, banking, insurance and education to allow greater private and foreign participation.
Last but not least, of course, is the nuclear deal, which would give India easy access to US nuclear technology and fuel. India imports more than 70 per cent of its oil and desperately needs access to new sources of energy. Yet the communist parties have opposed the deal on the grounds that it surrenders too much control over India's foreign policy to that old imperialistic power, the US.
But it would be unfair to blame the left for all of the UPA's policy inertia. Despite the prime minister's reformist credentials, Congress has shown little determination to champion market-oriented initiatives, preferring populist measures, such as a $17bn waiver on bank loans for small farmers in this year's budget. It was only on the nuclear deal that Mr Singh found the stomach to stand up to the left, with some local media even speculating he threatened to resign if Congress did not back him.
If the coalition survives next week's confidence vote, it will have a small window before general elections due by May next year to show that it has the ability to take India forward and execute some of the reforms awaiting implementation. But most analysts doubt that the coalition will focus on anything other than drumming up support at the polls. If such doubts prove true, the best Indians can hope for is a new government next year that will be better able to exercise power with responsibility, and deliver the reforms needed to bring prosperity to all of India's 1.1bn people.[/q]
Teh good news is that 11 MPs from teh NDA (center-right opposition alliance) may not vote with their bloc, so teh additional MPs that teh Third Front (left-leaning opposition alliance) managed to muster up may not be enough, allowing teh UPA (ruling centrist alliance) to survive teh vote
When Manmohan Singh, India's prime minister, decided to push through a nuclear deal with the US last week, the response from his erstwhile communist parliamentary allies was immediate and to the point. "That time has come," said Prakash Karat, head of the Communist party of India (Marxist). The CPI (M) and its three leftist partners, which strongly opposed the nuclear deal on ideological grounds, withdrew their support in parliament for the ruling United Progressive Alliance coalition led by Mr Singh's Congress party.
This set the stage for a parliamentary vote of confidence next Tuesday that will decide the fate of the government. If the UPA can survive the vote and emerge with new, more reform-minded partners, the exercise could be the best thing that has happened to the government since it was elected in 2004. For India, it might also finally be a chance to bid good riddance to the communists and their stranglehold over the country's economic future.
The four main communist parties over the past four years have enjoyed that most privileged of positions: power without responsibility. The leftists have refrained from formally joining the governing coalition, instead using their 59 seats to provide the UPA with the majority it needs in the 543-member national parliament to stay in power. At the same time, they have used their position to exercise an effective veto over any UPA policy that did not fit with their ideology.
The result has been four years of policy stagnation that has left India flatfooted in the face of the economic downturn. On almost every front - infrastructure, reduction of expensive subsidies such as on fuel, or allowing foreign direct investment in retailing and education - the communists have advocated the status quo, even when this is woefully inadequate.
As one illustration, a paper on the CPI (M)'s website written in 2006 recommends stopping the privatisation of India's airports and leaving their modernisation in the hands of the state-run Airport Authority of India. This was despite the fact that after decades of government management, many of India's airports are among the shabbiest of any fast-growing economy in Asia. Without a substantial injection of private capital and expertise, they are unlikely to keep pace with soaring air traffic.
The same year, the leftists opposed an increase in retail fuel prices, recommending tax cuts instead. Yet if the government had started raising fuel prices more aggressively in 2006, it might have softened the impact of the present oil crisis. The surge in global crude prices has raised the cost of India's fuel subsidies to an unsustainable $60bn (¤37.8bn, £30bn) a year.
The communists also opposed foreign direct investment in retailing and some on the left have opposed corporate retailing altogether, arguing that it hurts small shopkeepers. This is despite the stimulus large chains could provide towards upgrading India's neglected infrastructure, to allow the rapid movement of produce and goods around the country.
The left has also been protective of India's arcane labour laws even though these have deterred many large-scale manufacturers from relocating to a country that offers one of the world's largest pools of workers. The Organisation for Economic Co-operation and Development last year cited the Industrial Disputes Act as one big problem. This does not allow companies with more than 100 employees to dismiss even one worker from a manufacturing plant without government permission.
As the analyst Mohan Guruswamy noted, the slow growth of manufacturing has resulted in an economy that has moved to a "post-industrial" services economic model without having industrialised. This favours the educated urban middle classes but has left hundreds of millions of semi- or unskilled rural workers stranded in poverty.
Other areas in which the left has dug in its heels include reforms to pensions, banking, insurance and education to allow greater private and foreign participation.
Last but not least, of course, is the nuclear deal, which would give India easy access to US nuclear technology and fuel. India imports more than 70 per cent of its oil and desperately needs access to new sources of energy. Yet the communist parties have opposed the deal on the grounds that it surrenders too much control over India's foreign policy to that old imperialistic power, the US.
But it would be unfair to blame the left for all of the UPA's policy inertia. Despite the prime minister's reformist credentials, Congress has shown little determination to champion market-oriented initiatives, preferring populist measures, such as a $17bn waiver on bank loans for small farmers in this year's budget. It was only on the nuclear deal that Mr Singh found the stomach to stand up to the left, with some local media even speculating he threatened to resign if Congress did not back him.
If the coalition survives next week's confidence vote, it will have a small window before general elections due by May next year to show that it has the ability to take India forward and execute some of the reforms awaiting implementation. But most analysts doubt that the coalition will focus on anything other than drumming up support at the polls. If such doubts prove true, the best Indians can hope for is a new government next year that will be better able to exercise power with responsibility, and deliver the reforms needed to bring prosperity to all of India's 1.1bn people.[/q]
Teh good news is that 11 MPs from teh NDA (center-right opposition alliance) may not vote with their bloc, so teh additional MPs that teh Third Front (left-leaning opposition alliance) managed to muster up may not be enough, allowing teh UPA (ruling centrist alliance) to survive teh vote
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