More India News

Earlier in the week, I posted some comments of concern that Congress would continue with economic reforms. One of the links in the post was about the former finance minister who actually did much of the reforming a decade ago. It turns out that he Gandhi is stepping aside and the former Finance Minister, Manmohan Singh, will step in. This is great news, but his lack of political skill may prevent reform from getting through when tough votes comes up and a lot of arm twisting is need. The coalition governement isn't very strong and needs the help of communists to stay in power. Some snippets from the Economist:

FOR five enthralling days, Sonia Gandhi was India�s prime-minister-in-waiting. But the honeymoon was over even before the wedding. Although accepted as the prime ministerial candidate both by the Congress party and its allies, Mrs Gandhi decided not to put herself forward. At a chaotic party meeting on Tuesday May 18th, she said �the post of prime minister has not been my aim�, and that she must follow her �inner voice�, which was telling her that she �must humbly decline this post�. Drowned out by howls of protest from her MPs, she said her responsibility was to �provide India with a secular government that is strong and stable�I am not hungry for power.�

On Tuesday evening, crowds of protesting party workers gathered outside Congress's headquarters, with a hysterical few even threatening suicide if Mrs Gandhi did not change her mind. On Wednesday, a number of senior Congress figures quit their party posts and trooped to Mrs Gandhi's home, begging her to reconsider. But she stood firm. Later that day, a meeting of Congress MPs endorsed the 71-year-old Manmohan Singh, a highly respected former finance minister and Mrs Gandhi's preferred candidate, as prime minister (with Mrs Gandhi taking on the role of party chairman). A couple of hours later, Mr Singh met the president, who asked him to form a coalition government.

And this:

Indian investors� main worries were about the future of economic reform under Congress, and about the stability of its coalition. It was the scholarly Mr Singh, in fact, as a Congress finance minister in 1991, who initiated India�s biggest-ever package of reform and liberalisation measures. During the election campaign, Congress promised to increase India�s already soaring rate of economic growth to 10% a year. To do so, it will need to continue the reforms.

However, there are doubts about whether Congress will be free to pursue liberalisation. It will have fewer than 150 of the 545 seats in parliament. Even its �pre-poll alliance� of coalition partners will have only about 220, and a number of those will not join the government. To secure a majority in parliament Congress needs the support of the Left Front, which is dominated by the Communist Party of India (Marxist), or CPI(M). Although in West Bengal, where the CPI(M) has run the state government for the past 27 years, it has recently adopted a business-friendly pose to attract investment, the national party remains bogged down in the old dogma. Already its spokesmen have been demanding the abolition of India�s disinvestment ministry, which oversees its privatisation programme.

The markets may eventually take heart from Mr Singh�s reassuring presence and statements, and the �common minimum programme� Congress and its partners are drafting: on Wednesday, Mr Singh said economic reforms would continue, with a �human element�, and stressed the importance of healthy capital markets. Investors may also be relieved that the Communists have refused to join the government, preferring to offer �outside support�.

This may cloak the government in a paler shade of red. But it hardly seems to promise stability. Congress will remain prey to the demands of what one Indian commentator, Prabhu Chawla, has called �vulpine regional satraps, their egos larger than their parties�.

A postdoc here at Claremont interviewed the future PM for his dissertation and was impressed. His view is that reforms would conitnue because Singh would be FM(it was on Monday, before this news broke). He mentioned other things as well, but it was in a bar(last final that afternoon) and the only other thing I distinctly remember is that the Indian currency is undervalued.


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This page contains a single entry by Bob published on May 19, 2004 7:37 PM.

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