Sugar row underscores India’s political fragility

NEW DELHI, (Reuters) – The routine reopening of  India’s parliament has suddenly emerged as an awkward test for  the Congress-led government’s ability to push reforms such as  price deregulation in the face of opposition from its rural  base.

Tens of thousands of farmers from Uttar Pradesh state  protesting against low state sugarcane prices forced the  postponement of the winter session of parliament on Thursday in  a major political headache for the government, re-elected in  May.

Now, a once-divided opposition seemingly unable to recover  from election loss have vowed to disrupt parliament until the  government reverses a policy aimed at bringing in more market  forces to the sugar industry, one of India’s biggest cash  crops.

Yesterday, the opposition forced an adjournment for a  second day, with lawmakers running into the house shouting  slogans.

The massive street protest that brought much of central  Delhi to a standstill also reflected the fragility of political  stability in India, with its myriad caste, class and ethnic  issues always simmering among its 1.2 billion people.

“Such a display of opposition unity … has rarely been  seen outside parliament,” The Economic Times commented on  Friday. “The UPA government has only itself to blame for giving  an issue to the opposition on a platter.”

The ruling United Progressive Alliance coalition has given  states greater autonomy in fixing sugarcane prices to help lift  restrictions on the heavily regulated sugar sector and stop  sugar mills bearing the fiscal brunt of subsidised prices.

But a backlash has played into hands of the opposition,  including the Hindu nationalist Bharatiya Janata Party.

BYE-BYE GLOBAL POLITICS

Only a week ago, domestic politics appeared to be playing  second fiddle to international issues, such as global climate  change negotiations and Prime Minister Manmohan’s Singh’s visit  to Washington D.C. next week.

That mood has changed. Buoyant from the closure, protesters  say the ball is now in the government’s court. The government  may hold an all-party meeting on Monday over the issue.

“We have now adopted the policy of wait and watch for next  two to three days,” Anil Singh, national secretary of the  National Alliance of Farmers Associations.

“The response to Thursday’s rally was satisfying. Now the  government has come to its knees.”
It signals the reform in India will not be plain sailing,  despite a large majority for the Congress-led coalition.

Singh has promised economic reforms such as the  deregulation of state-run sectors, introducing more foreign  investment into areas like insurance, and boosting spending on  infrastructure to allow India to compete with the likes of  China.

But some reforms face endangering the Congress party’s  pro-poor “inclusive growth” manifesto and dashing hopes of a  major revival in Uttar Pradesh, where Gandhi scion Rahul Gandhi  has reached out to the poor in high-profile campaigns.

Any reforms face the stark fact that two-thirds of India’s  population lives in villages.

One reform, bringing in foreign investment in retail, has  already floundered because of opposition in rural areas.

Indeed, Gandhi was reported to have phoned Singh over  worries that the sugarcane issue could derail Congress inroads  into India’s most populous and politically important state.

The protest does not mean all of the Congress party’s  reforms will be in trouble. It still has a clear majority in  parliament.

For example, most analysts expect the government to raise  limits of foreign investment in the insurance sector, a policy  aimed at allowing India’s near 40 percent savings rate to be  recycled into investment and sustain higher growth rates.

“Disinvestment, etc, will go on, even though there will be  protests as usual,” political analyst Amulya Ganguli said.

“The opposition is delighted to have got an issue.”