Financial Times: A nation at the mercy (reg Bihar election)

A nation at the mercy
>Published: November 24 2005 02:00 | Last updated: November 24 2005 02:00
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The crushing defeat of Laloo Yadav in this week's state election in Bihar is
good for Bihar and a triumph for Indian democracy. Sadly, the result is
likely to be bad for the national economy because it will put further
obstacles in the way of the faltering economic reform programme of Manmohan
Singh, the prime minister.

Mr Yadav used to boast that "as long as there is aloo [potato] in a samosa,
there will be Laloo in Bihar", but after 15 years of his rule the voters of
India's poorest state wisely decided that it was time for him to go. They
elected a coalition backed by the opposition Hindu fundamentalist Bharatiya
Janata party.

Mr Yadav's successful defence of inter-communal harmony and his help for the
underprivileged - he was supported particularly by Muslims and his own yadav
caste of cowherders - had long been overshadowed by the state government's
rampant corruption and appalling economic mismanagement.

Yet his loss of influence could have pernicious effects in national
politics. Mr Yadav's secularism and his Rashtriya Janata party's 24 seats in
the national parliament make him a natural member of India's Congress-led
coalition government. He has been more constructive in policymaking in New
Delhi than he has been in Bihar.

The opposite is true of the Congress party's Communist allies: they have
encouraged foreign investment in their West Bengal stronghold while blocking
much-needed economic reforms at the national level. Although the Bihar
election has no immediate effect on the national electoral arithmetic, the
scale of Mr Yadav's defeat, and the risk of his MPs defecting to other
parties, gives the Communists even greater influence in the coalition than
before.

Mr Singh - as well as Sonia Gandhi, the Congress party leader pulling
strings from the shadows backstage - should nevertheless resist the
temptation to yield any more ground to the enemies of reform as a result of
this setback for their embarrassing Bihar ally. On the contrary, it is high
time for Mr Singh and Ms Gandhi to stand firm.

Since the government was elected last year, it has steadily backtracked on
its reform promises or watered them down to the point of irrelevance. There
is a great risk that India's reluctance to embark on an ambitious
privatisation programme, to liberalise foreign investment rules or to relax
stringent labour regulations, will squander the country's best chance in
years to start catching up with China.

The Congress party should examine the reasons for Mr Yadav's defeat. He
catered handsomely to the narrow interests of his supporters but failed to
deliver the investment and economic growth the whole state desperately
needs. If Congress leaders do not start facing down the Communists now and
implementing the reforms Mr Singh knows India requires, they may suffer the
same fate in national elections as Mr Yadav faced this week in Bihar.


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