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Why Mayawati is frontrunner for PM

By Swaminathan S Anklesaria Aiyar
Last updated on: April 30, 2009 20:11 IST
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India's parliamentary elections -- in which votes will be counted on May 16 after a month-long poll -- may confuse rather than clarify the country's politics. Small regional and caste-based parties may gain ground at the expense of the two biggest parties, the Congress and the Bharatiya Janata Party. A hung Parliament looks certain, so post-election negotiations (and purchases of support) will determine who rules India.

Most opinion polls suggest that the Congress-led United Progressive Alliance will win around 200 seats, with the BJP-led National Democratic Alliance not far behind. Other parties -- some of whom have formed a Third Front -- could win up to 150 seats. Opinion polls are often wrong, but all suggest that no alliance will come close to winning a majority (272 seats in a House of 543).

In a similar hung Parliament in 1996, Atal Bihari Vajpayee of the BJP became prime minister but resigned after 13 days since he could not get a Parliamentary majority. Something similar could happen again.

In 1996, a Third Front minority government came to power. Before collapsing, it had two prime ministers in two years, both from minor parties. Another Third Front government is possible.

Congress hopes to be the largest single party, getting first chance to form a government by buying support from others. But the four Marxist parties of the Left Front, who supported Congress for most of its current term, call it a running dog of imperialism after its nuclear deal with the U.S. Absent Left Front support, Congress may need Mayawati of the Bahujan Samaj Party. She is the leader of the Dalits, who comprise the bottom of India's caste ladder.

If the BJP emerges as the largest single party, it too may need Mayawati's help to form a government. The Dalit leader says the price of her support will be the prime ministership.

One new innovation could be a rotating prime ministership. In some Indian states, coalition partners have agreed to rotate the chief ministership. Mayawati herself has participated in such rotating arrangements in Uttar Pradesh, India's largest state.

When India entered the era of coalition governments in 1989, many feared this would lead to misguided policies that would wreck the economy. In fact, many minority governments lasted a full term; India engineered far-reaching economic reforms and attained almost 9% annual gross domestic product growth in 2003 to 2008. The venality and opportunism of politicians, who often shouted anti-capitalist slogans, did not prevent the adoption of good policies, or policy continuity when regimes changed.

Hence foreign investors should not worry overmuch if India gets another minority government headed by a minor politician unknown outside the country. India will almost certainly continue on its path of erratic, gradual economic reform that exasperates reformers but has paid good dividends. Some protectionism is inevitable in the current recession. Anti-dumping provisions will be used liberally. But India will not reverse its broadly open policies.

Liberalisation of foreign investment in banking and insurance will not make much headway, given the mess that financiers have made in the US. Small businesses may thwart the entry of foreign investment in retail. Yet, post-recession, economic liberalisation should spread to finance and retail.

Two major dangers remain. Every political party is promising grandiose subsidies and spending sprees. Congress promises every poor family 25 kilos of grain per month at three rupees per kilo, while the BJP promises 35 kilos at two rupees per kilo. The fiscal deficit is already 11% of GDP, and will continue this high for at least two years. National debt is over 80% of GDP. This could crowd out private investment and remains a long-term issue.

The second big danger is Mayawati's demand for a job quota in the private sector for Dalits and tribals, a form of reverse discrimination. Other parties may agree as a condition for her support. The Constitution guarantees job quotas for these two classes in government jobs. But quotas in the private sector could mean substandard manpower, seriously hitting India's competitiveness, especially in high-tech areas like computer software. Legal experts feel that the Supreme Court will strike down job quotas in the private sector as unconstitutional.

A minor danger is the return of wealth tax and capital gains tax on shares. This could hit the stock market. These measures are favoured by the Left Front and the Samajwadi Party, which might just dominate a Third Front government. Finance ministry technocrats may manage to scotch such moves.

The race is wide open, and I estimate the chances of key candidates as follows.

Mayawati (BSP) 33% to 38%

Manmohan Singh (Congress) 28% to 33%

L.K.Advani (BJP) 20% to 28%

Others 20% to 28%

"Others" include Mulayam Singh Yadav (SP); Sharad Pawar (NCP); Laloo Yadav (RJD); Jayalalitha (AIADMK): Chandrababu Naidu (TDP): Navin Patnaik (BJD): Ram Vilas Paswan (LJP) and Nitish Kumar (JD-U).

Mayawati hopes to win 50 to 60 seats, while her rivals think she will win less than 30. Her only ideology is to promote the interests of Dalits, and she is flexible on everything else. This flexibility makes her acceptable to all three political fronts -- UPA, NDA and the Third Front. So she could head three possible combinations, and this raises her overall chances. Some call her India's Obama, but the comparison is faulty: Obama won a clear majority in the US, while Mayawati will win just a handful of seats.

The Left Front opposes the BJP and the Congress. So, both the Congress- and BJP-led fronts may find Mayawati's support essential, especially if she wins over 50 seats. However, many small parties are banding together to keep Mayawati out. Three of them have banded together in Uttar Pradesh, hoping to win 50 seats there against less than 30 for her.

For foreign investors, the best outcome may be a stable government headed by the BJP, a professed liberaliser, and the only party that backs outright privatisation. The worst outcome may be a minority government controlled by the Left Front and Mayawati that introduces job quotas, and reimposes wealth tax and capital gains tax on shares. The actual outcome will probably be one of policy continuity.

The writer is a research fellow at the Cato Institute's Center for Global Liberty and Prosperity.

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Swaminathan S Anklesaria Aiyar