India’s Election – The Stories Underneath The Story

This was a phenomenal election and a spectacular result. The Indian voters are absolutely amazing. They may be poor and illiterate but they make great decisions that astound analysts and commentators. The reason for the success of the Indian Democracy is the wisdom of Indian voters.

The election machine is just as phenomenal. The election takes place over a month in stages. The election is held in all remote corners of India, some so remote that the only way to get there is by a helicopter (a decade or so ago, officials used elephants to get to these locations). No one is denied the opportunity to exercise their right to vote regardless of the difficulty of their location. The voter is not asked to figure out how to get to a voting booth. It is the responsibility of the election machine to get the voting “booth” to the voter.

Despite the long process, the results are not leaked. This is evident by the enormous surprise delivered by the voters to the country. The verdict of this election was such a surprise that the Indian stock market exploded to a gain of 17% in one day, mainly due to foreign institutional investors who rushed to buy Indian stocks on Monday morning.

There were many positives about the election:

  • For the first time since 1972, the sitting Prime Minister and the incumbent party got re-elected.
  • The recent disturbing trend towards smaller regional, ethnic parties winning at the expense of the two national parties was reversed decisively. This is a major positive for stable governance.
  • The Communist parties were utterly defeated,  a huge positive for India’s economy and for India’s foreign policy.
  • Every single group in India’s diverse milieu of religion, language, race and caste, had a reason to feel satisfied about the election’s verdict.

Much of the Newspaper and TV coverage we read is along traditional lines. Below we present our viewpoints as a “Rasik” of India. 

I. A Dual-Leader Campaign

For the first time, the Congress party ran its campaign on a dual-leader platform, with Prime ManMohan Singh as the party’s Chief Executive and the Gandhi family as the party’s Political Leader. This allowed Sonia Gandhi and her son, Rahul Gandhi, to campaign tirelessly for Dr. Singh. This allowed the Congress to sidestep attacks on Sonia Gandhi for her Italian roots and on Rahul Gandhi for his inexperience. This was a superb tactic that played on Indian Society’s reverence for renunciation of power.

BJP, the main national opposition party, recognized this danger and tried very hard to convince the voters that Dr. Singh was just the initial nominee and Congress intended to install Rahul Gandhi as the Prime Minister. This failed. Then, the BJP tried to attack Dr. Singh as a weak candidate who had exposed India to terrorism.

Prime Minister ManMohan Singh is probably the most respected man in India today. He is calm, sedate and regarded as very capable. He has managed India for 5 years through economic crisis and terrorist attacks. He is non-confrontational and acceptable to all of India.

India is probably the most diverse country on earth. By some counts, about 62% of the country is officially declared as a minority. There is a great deal of underlying tension among these various divisions. But in an election, the Indian voters have usually preferred a conciliator, a person who prefers to bring people together rather than one who confronts the divisions. The previous Prime Minister, Atal Behari Vajpayee of the BJP, was such a leader. He was widely respected by all religious groups. We recall Pakistani Taxi drivers in New York telling us that they trusted Vajpayee while adding that they don’t trust Mr. Advani, his number two.

Mr. Advani’s views and personality can be understood from the simple fact that he was Vice President Dick Cheney’s favorite Indian leader. Unfortunately for Mr. Advani, that personality type and those types of views were not deemed acceptable for a Prime Minister of India. This, we believe, is a verdict of this election.

So today, Dr. ManMohan Singh is Kingg to paraphrase a block buster Bollywood movie title.

II. The Influence of America

We spent several weeks in Mumbai in November-December 2008. During that visit, every one we spoke with seemed shell shocked by the unfolding specter of America’s economic mess. They saw huge American banks go virtually kaput overnight. The problems of giant firms like Citibank, Bank of America, AIG, Merrill Lynch, Lehman created an atmosphere of deep fear.

We recall a conversation with a Taxi Driver in Mumbai, a man who had migrated to Mumbai from a small town in North India. He did not speak a word of English. Yet he knew about the problems of American Banks and discussed this topic with us during the 30 minute tax-ride. Finally he said “I just knew that US banks were going to be in deep trouble some day; because the banks over there are not owned by the Government as our banks are.”

This was the prevalent view in India, the view of the “educated” middle-upper income professionals as well as the view of the common workers and taxidrivers.

Sonia Gandhi understood this and so she said to the voters “It was my Mother-in-law Indira Gandhi who nationalized India’s Banks. That is what protected India from the global economic crisis”.

This was a master stroke.

  • It addressed the core belief of India’s voters.
  • She took credit for saving the Indian economy from the American mess. This nullified BJP’s attacks on her party for the slowdown in the Indian economy.
  • This also nullified attacks by the Communist Party on the Congress for being too pro-American and for undertaken American style reforms.
  • She linked her government with Indira Gandhi, the strongest leader India has ever had, a figure that is revered in India, especially in North India.
  • In a subtle manner, she reemphasized her winning theme from the 2004 election. At that time, she had appealed to the Indian voters as Indira’s daughter-in-law and one who is devoted to the her husband’s country and not to Italy, her country of birth.
  • This is powerful stuff in India, all of India, not just rural India. To this day, many of the popular Urban soaps revolve around the mother-in-law & daughter-in-law relationship.

Her claim that Indira Gandhi’s nationalization of Indian Banks had protected India rang true to Indians in all walks of life regardless of their education, profession or wealth. Last year, petrified by the banking crisis in America, most people in India transferred at least a portion of their money from private Banks to old style nationalized Indian banks for safety.

Now that the election has been won, this master stroke of Sonia Gandhi might come to be seen as roadblock to reforming India’s finance sector. It is not clear to us that increased foreign ownership of India’s Finance sector would be acceptable in the short to medium term.

If you don’t believe us, listen to the comments of Mr. Kamal Nath who said “In the U.S., we are seeing government giving money to banks. In India, banks are giving money to government.”. Mr. Kamal Nath was the influential Commerce and Industry Minister. For his views, see the Wall Street Journal article on Monday May 18 titled “India’s Nath Downplays Prospects for Reforms“.

III. Victory of the Indian Farmer and of Rural India

It is the urban Indian that gets noticed by the world. The World now considers India as the IT country; the country that made offshoring and outsourcing household words in America. India is also known in America as a country of Doctors and now of Bollywood, the amazing industry that now competes globally with Hollywood.

The reality is India is a rural country and about two-thirds of India’s population works in the agricultural center. The rural Indian is the final arbiter of victory in India’s elections. The Congress party has always won on the strength of the rural vote. In contrast, the BJP has been the party of the small trader and the small businessman.

For the past few years, the business sector had tried to promote special economic zones modeled after Chinese zones. These zones often involved seizing of rich farmland from farmers in the name of industrial progress. Many states tried to ramrod these zones and evict farmers ruthlessly.

It was Sonia Gandhi who, a year or so ago, asked Prime Minister Singh to cool down this campaign. Her political instincts told her that this was a mistake, both morally, economically and politically. This was the right decision and a politically smart decision.

With strong support from rural India, the Congress won most of the major constituent groups in the Indian electorate. That is why the verdict was so definitive.

This means that the Doha round of global trade talks is in trouble. America and Europe want to open the agricultural sectors of the developing world to their exports without removing the subsidies to their own farmers. At Doha, India was the leader of the developing countries group opposed to these concessions.

Since Dr. Singh and his Congress party won on the strength of the rural vote, there is little chance they will now turn their back on these rural voters. Mr. Kamal Nath, India’s minister and trade representative will be even more opposed to opening up India’s agricultural sector without reciprocal concessions from the West.

IV. The Influence of Pakistan

Last December, passions in India were running very high with most people asking for a strong military response to the attack on Mumbai by Pakistani terrorists. The main opposition party, BJP, is a right-wing party considered to be more hawkish on Pakistan. The “softness” of Dr. Singh and the Congress was a major election platform for the BJP. 

By April 2009, the mood in India had changed. In our opinion, the main reason is the collapse of Pakistani society and the success of the Taleban. Being tough against a strong Pakistan is one thing and it is quite another to get in the middle of the disaster unfolding in Pakistan. The main rule of Politics, War and Business is that when you opponents are blowing up on their own, you simply let them blow up without getting involved.

The Indian voters, both Hindu and Muslims, realized this and their overwhelming message in this election was to elect a calm, sedate leader who would ensure the stability of India. This required a leader who was acceptable to all the groups in India and that leader was clearly Dr. ManMohan Singh.

In our opinion, this desire for a strong, national Government that would ensure the stability of India was the critical reason for the defeat of small, regional, ethnic parties that had been favored in the earlier elections. The Indian Voters realized that it is one thing for a regional party to run a particular state but it is another to have a motley group of such parties run the national Government. This is why they voted for a strong national party at the national level. 

That party was the Congress Party and that leader was Dr. ManMohan Singh.

V. Out-Lefting the Leftists – The Tata-Nano Saga

The state of West Bengal had become a stronghold of the Communist Party. The Congress Party needed their support to form a national government in 2004. The Communist Party managed to block a number of reforms that Dr. Singh wanted to implement. They were virulently against the Indo-US partnership and they condemned the Indo-US nuclear deal. In fact, they left the governing coalition as a protest against this nuclear deal.

In this election, they accused the Congress Party of surrendering to America and of damaging the interests of India’s poor. Not only did they fail at the national level, but they were routed in their core state of West Bengal. The saga of the Tata-Nano factory is a big part of this story.

The communists had come to power in Bengal by championing the rights of the poor farmer and the poor worker against the “exploitation” by business. A few years ago, the communists changed their spots and welcomed Foreign-Indian business & capital into Bengal. That was fine until they began trampling the rights of the farmers. The communist government began seizing farmlands to make space for economic zones and factories.

Ms. Mamta Banerjee, the leader of her party and an ally of the Congress,  saw the opportunity to out-left the communists. She chose the Tata-Nano factory as her vehicle. She led a vociferous public battle against this factory claiming that the Communist Government had seized farmland from farmers and given it away to the Tata-Nano factory.  Eventually the Tata group decided to leave Bengal and they were welcomed by the western state of Gujarat.

Ms. Mamta Banerjee won a big public victory that established her as the Champion of Farmers and exposed the Communists as agents of Big Business. This clearly worked in her favor. Her party won the state of West Bengal and routed the Communist party by out-lefting the left.

This is an amazing tale of Indian democracy, a tale in which every good entity won.

  • Tata-Nano won big because they got a great deal from the business-friendly state of Gujarat,
  • Gujarat won big because they got a new factory that could establish Gujarat as a center of automobile industry.
  • Bengal won because the state was finally rid of the Communists. Now their new government, with the aid of the national government in Delhi, will be able to land more business and financial help.
  • Ms. Mamta Banerjee won big. Her party now rules West Bengal and she will probably become the Minister in charge of Indian Railways, the largest single employer in the World.
  • Of course, the Communists lost and that is a big win for India, its economy and foreign policy. 

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