UPA’s anniversary blues

N Chandra Mohan

Plans for the second anniversary bash of the Congress-led United Progressive Alliance (UPA) government didn’t quite run according to the script. Instead of the usual bout of self-congratulation on its achievements in office, the mood for partying turned sombre with the agitation by medical students over reservations for other backward castes (OBCs) in central institutions of higher education; bear hug in the stock markets and allies asserting themselves more forcefully after the recent state assembly elections.

All of this took the shine from what the UPA considered its crowning achievement of two years in office, notably, the Indian economy growing at a tigerish clip of 7.5 to 8 per cent; relatively low inflation; and rapid build-up of foreign exchange reserves due to surging inflows of foreign portfolio and direct investments. The abrupt change in foreign institutional investor sentiment in the bourses, however, might well reverse itself in the coming weeks, but it did cast a shadow over the anniversary celebrations.

The troubling portents for its remaining term include, no doubt, the allies forcing a hesitant Congress leadership to announce that the Bill enabling reservations for OBCs would be introduced in the monsoon session of Parliament. The original preference of the Prime Minister instead was to appeal to the striking students that the interests of all sections of society would be satisfied with a phased implementation of quotas in tandem with an increase in seats in these educational institutions so that merit doesn’t suffer.

But what transpired at the Left-UPA coordination meeting on May 23 upset all such calculations. With the political consensus on reservations, the Bill will sail though Parliament and the OBC quota regime will kick in from the next academic year in 2007 itself. Disturbingly from the Congress’ perspective, the Left and UPA allies (DMK, RJD and PMK) are likely to derive all the benefits of pandering to the backward caste votebank while it gets alienated from its upper-caste support base.

In this milieu, the will to push through politically difficult reforms to sustain the robust growth momentum is likely to flag in the months ahead. As is well-known, the Left parties that support the government from the outside have been an important obstacle to what they consider neo-liberal reform, reflected in their opposition to privatisation of profitable public sector undertakings (PSUs), higher limits for foreign investments in insurance and retail trade, pension and labour reforms.

After tasting blood on OBC quotas, the more confident allies are unlikely to allow the reforms brigade in the Congress party any room for manoeuvre to implement such reforms. The government’s intention to even consider a partial sale of the government’s stake in PSUs like National Aluminium and Neyveli Lignite Corporation, for instance, has already drawn flak from the Left. The latter is also opposed to the government’s plans to raise domestic oil prices for consumers.

To shore up its electoral fortunes as its five-year term draws to a close, the Congress, too, is likely to revert to its traditional stance of Left-leaning populism in doling out subsidies. To be sure, Congress chief ministers in Punjab and Andhra already provide free power to farmers. But with the Left now raising the ante on tackling the agrarian crisis in the countryside, the ruling party also would be forced to come up with competitive populism to address the unmet basic needs of the population.