Those are the headlines, some rather cheeky, that have dominated since the assembly elections’ results were declared on Tuesday But the markets are already showing signs of worry. The two leading indices, Sensex and Nifty, lost over one per cent to close near the low of the day after it was clear that Congress was facing an electoral rout in several leading states.
Unfortunately, the more things change, the more they seem to mirror history. Take a step back from the developments of Tuesday.
Somewhere midway through the UPA’s first term, in 2007, Congress lost power in several states – Punjab, Uttar Pradesh, Uttarakhand and others. Inflation had begun to rear its ugly head, thanks to rising commodity prices. It did not take long before the Left parties, supporting the government from outside, started to turn the heat on the government. Foreign direct investment in the insurance sector, capped at 26 per cent, was not allowed to be raised to 49 per cent, despite the promise made by Finance Minister P Chidambaram during his budget speech on July 9, 2004. Left parties were also opposed to the government raising the FDI limit in the pension sector.
The first casualty of the political heat from its allies as well as the Opposition was the reform agenda. Retail, raising the foreign direct investment in insurance and other key reform initiatives took a backseat.
For seasoned watchers of the political scene, this show of cold feet was not difficult to predict. During P.V. Narasimha Rao’s tenure as prime minister, a similar story had played out. Three years into power, with inflation running high and a little after reforms had been initiated, the Congress party had developed cold feet then.
In a eerily similar scenario to what we saw earlier this week, it had just lost elections across six states and a general election was two years away. Power sector reforms were stalled, leading to the eight fast track power projects (remember Enron?) being allowed. The demand for bringing down customs duties in line with Asian peers could not be implemented till the UDF government with P Chidambaram effected the change in 1997.
UPA was lucky that the 2007 assembly elections setback happened at a time when the economy was on an upswing and growth was picking up.
This time it could be different. With government finances in dire straits, growth slowing, and the global economy anything but buoyant, the cat may be running out of its proverbial nine lives.
Reforms are sure to take a hit during the coming months. The number of seats for the Congress is going down in the Upper House. More states are turning against the Congress as the Gandhi charisma seems to be confined to the imagination of the Congress party. This time a Bharat Nirman kind of an announcement could be difficult to finance.
Things are getting out of hand for the Congress.
Just the right time, perhaps, for the Opposition to make its decisive move.
(Ashutosh Kumar Sinha covers politics. He is based in New Delhi).