Reinforcing political grip

By Alistair Scrutton - After years of running India from the shadows, ruling party chief Sonia Gandhi has grabbed a more public role with a cabinet-ranked post that may herald more social welfare spending and less talk of economic “miracles”. In just a month, the Italian-born politician who heads India’s most powerful family dynasty has also overruled ministers to widen a food subsidy bill and tried to push through a women’s rights bill languishing for more than a decade.

Her appointment to head the reconstituted National Advisory Council (NAC) signals a move from party insider to government policymaker, with greater clout to pressure reformist Prime Minister Manmohan Singh to focus on social programmes, reinforcing the ruling Congress party’s weakened socialist roots. It may also give her one more platform to help plan the succession to the elderly and frail 77-year-old Singh, who most expect will leave office before the next election, scheduled in 2014, to possibly clear the way for Gandhi’s son Rahul.

Underlying all this is a sense within the ruling Congress party that the governing coalition’s second term must ensure that accelerating economic growth trickles down more to millions of poor to help bolster the party’s voter base. “Sonia sees the government as obsessed with the priority of high growth,” said Mani Shankar Aiyar, a senior Congress politician who has known Sonia Gandhi for decades. “NAC will precisely be the conscience of the government and institutionalise the party’s influence over the government.”

Few, however, expect runaway spending or a return to the planned economy of two decades ago. India is getting used to nine per cent growth and the middle class is enjoying its fruits with booming consumerism, malls and ever more lavish Indian weddings. The February budget was praised for attempts to cut the fiscal deficit. Ministers recognise some ambitious programmes, like a recent bill to widen access to education, can only be paid for if India grows at around nine percent a year.

Food subsidies
But government gross borrowing is still planned at a record 4.57 trillion rupees (around $103 billion) this fiscal year, and the food bill is one example of the pressures to spend more. In one of her first directives as NAC chairwoman, Gandhi told ministers to change the food bill to hike food subsidies from 25 kg to 35 kg per family, at an additional cost of $2 billion.

“The food bill promises to deliver anything under the sun,” said Jahangir Aziz, chief India economist at JP Morgan. “But if there is not some form of capping the bill’s spending, it could all help blow up ... efforts to consolidate the (budget) deficit over the next three years.” Many analysts worry that subsidies on food and fuel will blast an ever bigger hole in government finances, even though government officials have indicated that subsidies should at least be capped at current levels and could even be reduced.

Now Gandhi has a more ambitious agenda, including ensuring another election win over nationalists and regional parties that would return the party to the dominance it enjoyed in the decades after India’s independence in 1947.