Saturday, January 7, 2012

Does the Congress have a lot to cheer about now?

A few developments of recent weeks are bound to give the Congress government a lot to cheer about. Maybe 2012 will be the year when the party finds its mojo back. Hopefully, it is able to lift itself out of the pit that it finds itself in at the moment.

Food inflation is down to negative numbers – and though this comes on the back of the high base of last year, it must be a lot of relief to policy makers. Imagine if inflation had continued to remain high even now? That would have had a massive impact on the results of the polls in the five states next month. As if on cue, the RBI has now indicated that it might lower interest rates in the near future. That should give relief to a beleaguered industry, which has been reeling under the pressure of high interest costs. The general expectation amongst analysts about corporate results in the Oct-Dec quarter is that revenue growth will slow down significantly (BSE sensex companies @ 19% compared to some 25% in the Apr-June quarter) and profit growth will be very tepid. Some forecasts talk of negative profit growths. A low interest regime is urgently needed to kick-start investments in the industrial sector.

Then there is the sudden and dramatic waning of the Anna movement. With public disenchantment growing, the veteran serial faster has decided not to campaign against the Congress in the polls next month. Even though Anna’s effect would have been limited in any case – given the huge amount of logistics required to cover such a large area – it would still have been a worry in the Congress’s mind. The real impetus to the Anna movement in any case came from media – and even before Anna decided to call off his campaigning, the media interest in Anna had been waning. That was perhaps one of the factors in his decision. Will this have a positive rub-off on the Congress’s prospects in UP? Well, that remains to be seen. If as expected, the party gains power in Uttarakhand and Punjab – both from the NDA’s fold – that will be a big boost. If the Congress also does relatively better than expected in UP – it will have a lot to cheer about.

Then there is this surprising (or not so surprising?) hand of friendship that Mulayam Singh recently extended to the Congress. He has said that he will ensure that the UPA government does not fall till its term ends in 2014. Now I wrote some time back – on December 7th in fact (Congress must do a pre-poll alliance with the SP…..) that the SP and Congress are natural allies. The SP has regional ambitions; the Congress national. Akhilesh Yadav wants to be CM; Rahul Gandhi PM. Both have helped each other in the past. Both perhaps realize that neither can form a government at the state or the center on their own. Ideally they should have just done a pre-poll alliance. That would have ensured that the combination certainly defeated the BSP. Now it’s a little unsure. My own feeling is that UP will throw up a hung assembly and maybe Mulayam is preparing for that scenario. He will need the Congress’s support to set up his government in UP if that happens, the Congress will only be too happy to grab his hand of friendship. After all, the Congress surely must be desperate to get Mamata off its back.

And finally, the Congress has done very well in the recent Maharashtra municipal council polls all across the state. The Congress and the NCP fought elections separately – and both have managed to relegate the BJP to the 3rd position. Further, it is widely believed that in the strategic Bombay Municipal Corporation (BMC) polls in Mumbai next month, the NCP and the Congress will form an alliance. Till now, they have always fought the BMC elections separately – giving the Shiv Sena-BJP-RPI combination an easy chance to take power in the BMC. If the two parties do form the alliance, it is nearly certain that the two will come to power.

And lastly, the BJP’s own self-goal in UP and its likely poor performance in Uttarakhand and Punjab (with its partner, the SAD) is likely to give the Congress a lot of competitive joy. The Kushwaha episode has already dented the BJP’s claim of being less corrupt. With Team Anna finally attacking the BJP on its u-turn on the Lok Ayukta matter and the induction of Kushwaha into the party, and with Yeddy again threatening the BJP with dire consequences in Karnataka, the party finds itself on the back foot.

What should we expect from a relative period of political calm in the near future? If the statements made by the PM and the ministers are anything to go by, we should expect renewed vigor in terms of policy decisions. The PM and the Finance Minister keep saying that the decision to allow FDI in retail will be revived. Maybe with SP in the fold post the UP elections, the decision will indeed be revived. Maybe the SP will also ensure that the pension bill goes through – the BJP already supports it. The new aviation minister Ajit Singh has said today that he will recommend FDI all the way up to 49% - the talk in the past had only been for a 26% limit. All this is good news – the decision making process in the government has come to a grinding halt in the last year and more.

What is likely to happen to the Lokpal Bill in the budget session? One clear reason why the Congress agreed to delay the start of the budget session till after the UP elections is because of the alignment it expects to have with the SP. But the SP is not going to be a supporter of the Lokpal Bill. What happens to the Lokpal Bill will depend on what kind of compromises the Congress is willing to make. I personally feel that the Lok Ayukta clause will be dropped in its entirety. Almost no party wants it – and with Anna’s pressure off – how could the Congress be bothered if the Act provides for Lok Ayuktas or not? With the Lok Ayukta provision off, will the SP be willing to play ball? If the BSP loses the UP elections, will Mayawati’s 18 MPs in the Rajya Sabha support the passage of the Lokpal bill without the CBI being made “truly independent” (whatever that means)? Unlikely. Will the BJP support the Bill? Again, with Anna’s pressure off, no one’s going to bend backwards to pass the bill. I have a feeling that the Bill may not pass muster in the Rajya Sabha for some more time – unless some magical intervention happens. Unless some regional parties start supporting the Bill (especially with the Lok Ayukta clause off).

What are the likely pressure points for the Congress in the coming months? The trial court’s decision on making Chidambaram a co-accused with Raja in the 2G trial will surely be a difficult nut to crack. It will revive the BJP’s sagging morale. If for whatever reasons, the Congress doesn’t do reasonably well in UP, that will put a lot of pressure on the government. If the sagging rupee puts renewed pressure on fuel prices, that will also be bad news for the government. But overall, the Congress must – after a long time – find itself in a bit of a sweet spot now.

The real truth is that whoever is in government, we want decision making to happen. We want the policy freeze to end. We want to see action. More than anything else, we Indians want to see significant progress during our lifetimes. We want new laws on corruption – but we don’t want them in this manner. I hope the ensuing period of relative calm gives us the fillip we all seek…..

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