State elections promise heavy weather ahead

Written by Nistula Hebbar | Nistula Hebbar | New Delhi | Updated: Mar 7 2012, 07:39am hrs
Akhilesh YadavMulayam & Akhilesh Yadav: Sweep back to power in UP
The results of Assembly polls in five states, widely deemed a mini general election, have brought bad news for the Congress, that too on the eve of a crucial Budget session of Parliament.

The leader of the Opposition in the Lok Sabha was first off the blocks, invoking a possible mid-term poll. The Congress has lost the ability to be the pivot of the UPA government at the Centre and should seek a fresh mandate. We are ready for mid-term polls, Sushma Swaraj said.

All this does not bode well for economic governance at the Centre in the months to come, even as GDP growth sharply decelerates and the overall investment climate takes a turn for the worse.

The BJP leader may have some reason to believe that the UPA government will face a period of great instability, and a very troublesome Budget session of Parliament to begin on Monday. Even before the elections, Trinamool Congress chief and West Bengal chief minister Mamata Banerjee had opposed the government on various issues ranging from foreign direct investment in retail to the formation of the National Counter-terrorism Centre.

Some sections in the Congress had hoped that a party-supported government in UP with the Samajwadi Party at the helm would get it a new, more pliable ally. Mulayam Singh Yadavs spectacular victory in UP and the shock defeat of the Congress in Punjab have, however, dashed those hopes. Even so, Congressmen are desperately seeking a silver lining.

With a thumping majority like that, Mulayam Singh Yadav also needs to deliver. He will require the Centres help, increased allocation for projects and a workable relationship with us, said a central minister. The minister said the Direct Taxes Code was on track as BJP president Nitin Gadkari had promised support. The Goods and Services Tax Bill, however, will be tougher to clear as the Samajwadi Party has not been in favour of it in the past.

The recent trend of non-Congress, non-BJP chief ministers jointly opposing the Centre as witnessed over the NCTC issue and amendments to the Railway protection Force Act, 1951 has raised the political possibilities of a third kind. More pertinently, next elections to Rajya Sabha where the government is in a minority, will see 18 UP seats up for grabs. Most of these seats will go to the SP, at least three more than what they currently hold. This will further reduce the governments bargaining power in Parliament to clear the least contentious of legislation.

Congress general secretary Rahul Gandhi issued a statement accepting responsibility for the partys poor performance in Uttar Pradesh: I take responsibility for this, since I was at the front of the campaign. One day, I hope we do well in UP, but my work is about improving the political system in this country.

A senior central minister, who considers himself pro-reforms said the mandate could be used as a signal to the government that it had, in fact, entered the slog overs for 2014. Either the government acts like it is governing or drift and lose the rest of the country. The mandate is also a reaction against a central policy drift, he said.

Meanwhile, the SP has plumped in favour of close cooperation with the Centre in order to speed up infrastructure projects in the state. In an interview with FE just a week ago, Samajwadi Party leader Akhilesh Yadav had said: Our priority is infrastructure, especially power and roads, and we want to revive the mechanism of the UP development council, may be not by that name but doing the same work. He also did not rule out further public-private partnership projects, despite the partys attacks on Mayawati on this front. We want to improve the investment climate of the state, he had said.

In spite of positive noises made by SP, one cannot rule out strong regional parties forging an informal front in the months ahead to put the UPA government at the Centre on notice. One key message coming out of the current round of Assembly polls is that the two biggest national parties Congress and BJP have ceded space to regional political forces in a big way. In Punjab, the Akali Dal has done very well but its pre-poll partner BJP has lost significantly.

Therefore, the Centre will have to contend with much more assertive politics from regional outfits and this is bound to have an impact on the direction of economic reforms.