Cong on losing wicket: UPA-2 and governance in question

The prognosis for UPA-2 and governance is glum after the poor showing of the Congress in Uttar Pradesh, Punjab and Goa.

In theory, state-level election setbacks change nothing at the centre. But the failure of the Congress is now apparent to all its allies and enemies. This will weaken its political hold further.

In fact, what this mini general election has proved is that the Congress is a liability for the UPA. Now, not only Trinamool, but also the Samajwadi, the DMK and other allies will start flexing their muscles.

Despite launching a huge political attack led by Rahul Gandhi, the party is at No 4 in Uttar Pradesh. In Punjab, it is losing to the Badals despite the state’s tradition of turfing out incumbents unfailingly. In Goa, its chief minister is linked to several mining scams, and is paying the price. Only in Uttarakhand and Manipur is it looking like a small winner – but they hardly count. In the former, the BJP is fighting every inch of the way.

The message this sends to everyone – whether it is to the party itself, its allies, or its enemies – is that the Congress is on a losing wicket. Inflation, poor economic management, corruption and poor governance have taken their toll.

A party that is on a losing wicket will not have the guts to take on the bold economic decisions that are now needed to rescue the economy.

In fact, its weak showing will embolden all its allies to make their own unrealistic demands. The Congress’ best hope was that the Samajwadi Party will need its support in UP, and in return would give it unwavering support to counter the clout of Mamata Banerjee’s Trinamool Congress in UPA-2.

The Samajwadi, however, is so close to a majority on its own that it is easier for it to woo the splinter parties and even break segments of the BSP or the BJP to form a government. It can rule on its own terms, and Congress will not be replacing the Bengal Tigress with a Samajwadi Poodle as alliance partner in UPA.

So what should one expect from UPA-2, both in the budget and beyond?

First, the UPA will have to look for a scapegoat for its electoral failures. It will make state-level leadership changes in UP, Punjab and Goa to show purposive action. But the real damage is at the centre – where its authority has been weakened.

With Manmohan Singh looking tired and war-weary, and with the presidential elections due in July, the Congress may seek to refurbish its image by kicking him upstairs and replacing him with another, fresher face as PM.

With Principal Secretary Pulok Chatterjee already running the PMO with direct access to both Sonia and the PM, it is clear that this structure suits the party boss to a T. Work gets done, and the PM can remain a figure-head who stays above the battle. Any PM, that is.

The best replacement for a failed Manmohan Singh would be Pranab Mukherjee or even P Chidambaram, but the latter is still not out of the woods in the 2G scam, and Pranab is not trusted by the first family. Defence Minister AK Antony is one possibility, but he seems even more Manmohanish than Manmohan.

In the end, if Sonia sees this manoeuvre as too risky, Manmohan Singh may still remain, but at the cost of a dented image which the UPA will find difficult to shrug off in 2014.

Second, whatever the changes made, the UPA will not be able to push through hard reforms in this budget or the next – which will be the last one before the next general elections in 2014. At best one can expect a messy budget that throws sops to business and voters based on potential electoral gains. The sugar industry is already licking its chops after the Samajwadi victory in UP.

If fiscal consolidation will get tougher, the Reserve Bank will go easy on rate cuts – and this means there will not be any dramatic return to faster growth this year, too. Given a weak external environment, lack of reforms means the Indian economy could slow down further.

On the other hand, the chances are the UPA will fast-forward social spending schemes and populism, never mind what it does to the budget or how it impacts inflation.

Up ahead are the Gujarat polls this year, and next year there will be the Madhya Pradesh and Chhattisgarh results. The Congress will have to make its point in the latter two if it is to have any hope of maintaining its seat count in 2014 – but it is going to be a hard battle.

Third, the UPA will face huge pressure from the courts as the 2G, Commonwealth and other trials start generating their verdicts. The UPA is already in court seeking a review of the 2G and Vodafone orders, but if it starts slipping politically, it will not find the courage to do further battle in court - whether it is in telecom or any other sector.

The 2014 elections are now clearly in sight and the Congress is not looking like a winner at this point. The moot point is this: what will it do to change political perceptions?

On past form, given how the Congress flunked its 2009 mandate, the party does not have the stomach of good, sensible economic decisions.

Governance could be the main casualty of the UP and the verdict of these mini general elections.