Indian coalition breakup
Article added on September 20, 2012 at 12:49 Italian time
Banerjee, the chief minister of West Bengal, announced on September 18, 2012
that she would pull her party out of the ruling United Progressive Alliance
(UPA) if the government would not reverse its decision on allowing 51%
foreign direct investment (FDI) in multi-brand retail (such as for instance
Walmart or Tesco) . India's Congress-led coalition relies on her 19 lawmakers. Without
the members of Banerjee's Trinamool Congress (TMC), the UPA will only
control 254 seats in the Lower House of Parliament (Lok Sabha), 18 votes
short of a simple majority.
Mamata Banerjee came to power in West Bengal in a 2011-landslide victory.
Her TMC is a 1997-split off from the Indian National Congress, which used to
be a pretty socialist party, from which India's economy is suffering until
today. Unfortunately, “Didi” (the elder sister) Banerjee not only ended
decades of Communist rule in run-down West Bengal, but she is not much more
open to economic reforms than the Communists and has been a reform obstacle
within the UPA.
India desperately needs liberalization in many sectors. De-nationalization,
more FDI, cutting of red-tape and other reforms should be on top of the
As mentioned regarding the
as well as on the subject of the
Uttar Pradesh elections of March 2012, the Congress party has
ruled India for far too long.
Its Gandhi-family leadership has proven incompetent time and again.
Currently, the party has no credible leader. Prime Minister Manmohan
Singh has shown in the past that he was ready to modernize and liberalize
India, but he was held back not only by Didi, but also by Congress's strong woman, the Italian-born
Sonia Gandhi. She is the widow of Rajiv Gandhi, India's former prime
minister, who was assassinated in 1991; his mother, longtime prime minister Indira Gandhi, was killed in 1984.
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Manmohan Sing's years as prime minister have been overshadowed by scandals.
Although he himself is considered one of India's rare politicians with clean
hands, corruption within his United Progressive Alliance was and remains
rampant. Keywords are the Commonwealth Games, the privatization of New Delhi's airport,
irregularities in the telecommunication sector, housing scandals, bribes in
the defense sector, coal scandal, etc.
Finally, in September 2012 the Indian government of Manmohan Singh announced
a series of desperately needed economic reforms such as to allow the
mentioned foreign direct investment (up to 51%) in multi-brand retail, cap
subsidizing LPG cooking gas to six cylinders a year per consumer and
increase diesel prices by 14% to curb the fiscal deficit, which is
officially estimated to be around 5.1%, but in reality could reach well over
6%. In the second quarter of 2012, the Indian economy grew 5.5%, which
remains far less than what China and other emerging markets are achieving.
India is subsidizing the prices of diesel, kerosene oil and cooking gas
(officially) to help the poor and to curb inflation. Subsidized diesel
prices only help the people with a car, including farmers and the transport
business, but not the hundreds of millions of poor living around or below
the poverty line. Even the three state-owned oil refiners are complaining
about losses; they import some 80% of the oil they refine. Subsidies distort
prices and resource allocation. They are a simple waste of money. In the
current global economic climate, India has to get its deficit under control.
Credible financial reform steps are needed. Anti-corruption, farming,
banking, insurance and pension reforms are overdue. Backtracking from
the decisions already taken would be a major blow to the credibility of the
The September 21 deadline - when reforms should take effect and the 6
Trinamool ministers would resign, as announced on September 18 - may decide
on the government's future. The Congress's leaders think that the government
can survive a no-confidence motion even without the TMC members of
parliament. They hope for outside help instead, maybe by even bringing
another regional party into the coalition. At the same time, Ramgopal Yadav,
the Samajwadi Party (SP) General Secretary, made already known that he could
not say for how long the SP with its 22 lawmakers would continue to support
the UPA. For now of course, he maintains his support for the ruling
coalition, which is about to break apart.
If the UPA can't even push forward modest steps towards the free market such
as the one's announced last week, the coalition is doomed. An Indian
coalition breakup would not be a disaster. As long as India does not embrace
liberal reforms, it will remain a backward society. The optimistic scenario
is that Friday September 21, 2012 may become a watershed, although we cannot
exclude a last-minute deal between Congress, SP and TMC. Some TMC members
are tempted to cling on to power. The next elections are only scheduled for