Bloomberg News

Singh Turns to India State Vote for Succor After Scandals

February 09, 2012

(Adds analyst comment in the eleventh paragraph.)

Feb. 8 (Bloomberg) -- India’s government gets a chance to rebuild its political support after a year of setbacks and gauge the popularity of Rahul Gandhi, its touted next leader, as voters go to the polls in the nation’s most populous state.

The Congress party, which leads the ruling federal coalition, is set to more than triple its strength in the provincial legislature of Uttar Pradesh and play the role of kingmaker in forming the next administration even as it fends off criticism over corruption scandals, opinion polls show. Results in the monthlong elections that began today will be announced March 6.

A higher tally in the state, where Congress holds 22 of 403 seats, would bolster Prime Minister Manmohan Singh who in December pledged to resurrect plans to allow foreign retailers like Wal-Mart Stores Inc. to open supermarkets that were stymied by political allies. Uttar Pradesh, with 200 million people, is India’s biggest political prize, electing about a seventh of the 545 lawmakers in parliament’s lower house.

“There’s an opportunity for Congress to rebound after the problems of last year,” said Satish Misra, a political analyst at the New Delhi-based Observer Research Foundation. “If it improves its position as expected it will give them some fresh momentum, which means they can be bolder in trying to push through some of the difficult reforms.”

The fortunes of Gandhi, scion of Congress’ president and three prime ministers, also ride on the result. A strong showing in a state where he led campaigning raises the likelihood of his succession, said B.G. Verghese, an analyst at the Centre for Policy Research in New Delhi and a former aide to ex-Prime Minister Indira Gandhi, Rahul’s grandmother.

Caste Politics

“If he does really well, then it will be something of a personal triumph,” Verghese said in an interview. “Then people will be rooting for him to take over the party.”

Indians took to the streets in 2011 to protest alleged graft in an award of mobile-phone licenses and inflation that stayed above 9 percent for a year. In a blow to Singh, the Supreme Court decided Feb. 2 that mobile permits won by 11 companies in a 2008 sale would be canceled and will be auctioned at a later date.

In Uttar Pradesh, which straddles the Ganges River, politics is dominated by allegiances of caste and religion. Over the last two decades, the rise of regional parties appealing to identity has eroded support for Congress from the 269 seats it won in 1985.

Since it lost control of Uttar Pradesh in 1989, the party has needed coalition allies to rule nationally. The next general election must be held by May 2014.

Poll Predictions

Opinion surveys suggest that no clear winner will emerge from the election. Chief Minister Mayawati’s Bahujan Samaj Party, which draws its support mainly from those on the lower rung of the traditional caste system and which won a majority 206 assembly seats in 2007, may see its strength slashed in half to 101 seats, according to a poll conducted by Nielsen Holdings NV and the Star News television channel.

“Mayawati has scored a number of own goals, this is the reason Congress will benefit,” said Verghese. “She has led what is seen as a rather corrupt government. The personal extravagance has been quite astonishing.”

In October, Mayawati attended the official opening of a park on the outskirts of New Delhi that used taxpayers’ money to build statues of herself and icons of lower-caste leaders. The project cost $139 million, the Times of India reported.

Main Contest

Her main opponent, the Samajwadi Party of Mulayam Singh Yadav, is likely to emerge as the biggest party with 135 seats, 38 more than in the previous vote, according to the opinion poll. Congress may win 79 seats, with its chief rival on the national stage, the Bharatiya Janata Party, coming fourth with 61 members in the state legislature.

Nielsen questioned 35,973 people in 202 constituencies from Jan. 4-20. It didn’t give a margin of error. Another opinion poll carried out by India Today magazine and ORG also showed the Samajwadi Party winning the most seats.

A poor result could plunge Singh’s government into renewed crisis management as it prepares to present the federal budget in March and revive plans to allow greater overseas investment. Business leaders have urged steps to improve confidence in the $1.7 trillion economy, which the central bank forecasts will grow 7 percent in the year through March, the slowest expansion in three years.

‘More Pressure’

India’s benchmark stock market had its second worst year on record in 2011, falling 25 percent as concerns about policy paralysis caused an exodus of investors. The rupee fell 16 percent, the worst performing currency in Asia.

If Congress helps the Samajwadi Party form a government it may get support from Yadav’s 22 lawmakers in the lower house of parliament, where Singh relies on parties outside his United Progressive Alliance for a majority.

If Gandhi and Congress fail to significantly improve on their performance in the state’s last election in 2007, parliamentary allies may step up efforts to distance themselves from the ruling coalition, said Mohan Guruswamy, chairman of the Centre for Policy Alternatives in New Delhi.

“This would heap more pressure on the government after a very tough year,” Guruswamy said.

--Editors: Mark Williams, Peter Hirschberg

To contact the reporters on this story: Andrew Macaskill in New Delhi at amacaskill@bloomberg.net; Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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