US embassy cable - 05NEWDELHI3365

C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 003365 
 
SIPDIS 
 
E.O. 12958: DECL: 05/04/2015 
TAGS: PREL, ECON, PGOV, PINR, IN, Indian Domestic Politics 
SUBJECT: INDIA'S LEADING COMMUNIST OPENS UP TO THE EMBASSY 
 
Classified By: Charge Robert O. Blake, Jr. for Reasons 1.4 (B, D) 
 
1.  (C) Summary: Meeting with Charge and Poloff on May 4, 
newly-elected Communist Party of India (Marxist) General 
Secretary Prakash Karat demonstrated that he is a talented 
 
SIPDIS 
and skillful leader who is well-aware of his political 
importance.  Karat emphasized that the Communists want to 
play a responsible role in governing India and avoid 
confrontation and harsh rhetoric, but are determined to 
oppose policies that clash with their ideology.  He welcomed 
closer ties between the US and India, and Foreign Direct 
Investment (FDI) on a case-by-case basis, stressing that it 
must benefit the country.  Karat was confident that the 
CPI(M) would expand its influence, but had no illusions that 
it could form a "Third Front" capable of taking power in New 
Delhi any time soon.  He pledged that his party would 
continue to work with Congress to ensure that the United 
Progressive Alliance (UPA) government completes a five year 
term.  Welcoming the chance to open a dialogue with the USG 
and discuss issues face to face, Karat promised to hold more 
such meetings on a regular basis.  End Summary. 
 
The US-India Relationship 
------------------------- 
 
2.  (C) Karat opened by stating that while the CPI(M) 
supports the United Progressive Alliance (UPA) from the 
outside, it does not determine policy.  The party has no 
problems with stronger economic ties between the US and 
India, and finds increasing trade, especially in the IT 
sector, "promising."  On the whole, he emphasized, his party 
favors improved bilateral relations, but wants India to 
maintain its "independence" and has "reservations" on several 
issues, noting that the CPI(M) "objects" to the proposed US 
provision of a National Missile Defense (NMD) system to India 
(sic).  The party wants closer ties with Pakistan and does 
not want to encourage an India-Pakistan arms race. 
 
3.  (C) The Charge corrected Karat, replying that the US 
proposal is only for a limited missile defense system that 
would be a stabilizing influence.  Likewise, the US is 
interested in supplying combat aircraft to India, as this 
will meet an existing need, and the prospect for India-US 
co-production will benefit the Indian economy. 
 
The Economy 
----------- 
 
4.  (C) Karat welcomed the decision by the Board of Air India 
to purchase Boeing aircraft, commenting that the CPI(M) "is 
not opposed" to the deal.  The party is also not opposed to 
all foreign direct investment (FDI) in India, but insists 
that "the requirements must be prioritized," to ensure that 
they benefit the country through employment creation and 
technology transfer.  One example is retail trade.  The 
CPI(M) is "apprehensive" that opening this sector to foreign 
companies will "displace labor" in the small trading sector 
and put Indian shopkeepers out of business. 
 
5.  (C) The party advocates GOI approval of FDI on a 
case-by-case basis.  In telecom, Karat did not see any reason 
to raise FDI, as India already has private companies in 
competition with a viable public sector entity and providing 
good service.  Raising the cap to 74 percent as Congress has 
proposed "would eradicate Indian companies," Karat 
maintained, and in any case the communication sector should 
not be completely foreign-owned for security reasons. 
 
6.  (C) Karat joked that the CPI(M) has little leverage on 
these investment issues, as the GOI can make many investment 
decisions without parliamentary approval.  Insurance is an 
exception, and there the party could use its clout to oppose 
proposals to increase FDI from 26 to 49 percent.  To 
demonstrate CPI(M) commitment to case-by-case examination of 
FDI proposals, Karat noted that his party had "no objection" 
to increasing FDI in civil aviation, which benefits the 
country.  The party wants to ensure that the GOI gives 
preference to "domestic capital" over foreign investment in 
certain areas.  "We want India to build on its strengths, and 
have no phobia against foreigners, like the swadeshi wing of 
the BJP," he stated. 
 
7.  (C) The Charge replied that research has documented that 
opening China to retail trade benefited the economy, as 
Chinese suppliers to Walmart, for example, created more jobs 
than were lost.  India would benefit even more, as it has a 
strong private sector and the expansion of markets would more 
than make up for job displacement.  Likewise, a liberalized 
banking sector would introduce long-term banking methods that 
don't currently exist in India and provide financing for 
much-needed infrastructure projects, the Charge stressed. 
 
Domestic Politics 
----------------- 
 
8.  (C) Karat dismissed press reports that the CPI(M) planned 
to create a "Third Front" to supplant the UPA, noting that 
they never printed the second part of his public statements 
where he said that Communists should work towards such an 
alternative in the long term.  There have been three such 
"experiments" so far in India, with little success.  The 
CPI(M) is cautious and wants to create a stable coalition, 
not just an ad hoc alliance.  To be successful, there must be 
a "common policy plank" to which all the parties must agree, 
he stated. 
 
9.  (C) Prospective members for such a Third Front include 
the DMK in Tamil Nadu, the SP in Uttar Pradesh, and the RJD 
in Bihar.  For the present, the Communists plan to work with 
these potential allies to create a "policy alternative" 
within the UPA.  The Left is the UPA's strongest guarantee of 
stability, he underlined, as the Communists do not want this 
government to fall and it will not do so unless Congress does 
a poor job of managing the coalition. 
 
10.  (C) Karat told the Charge that the CPI(M) is gaining in 
strength, particularly in the three "red forts" of Tripura, 
Kerala and West Bengal.  He predicted that the CPI(M) would 
form the next government in Tripura and recapture the 
Calcutta government in 2006.  These upcoming electoral 
contests will not disrupt the UPA in New Delhi, he insisted, 
as Congress knows it is weak in both states and cannot attack 
the Communists there while cooperating with them in the 
capital.  In Kerala, Congress is on its way out, as it is 
time for a shift, and "it is our turn to come in."  Congress 
has split in Kerala, he noted, and lost its ally Mamata 
Banerjee in West Bengal. 
 
11.  (C) In Karat's view, it would be "a mistake" for 
Congress to call early national elections, as it is not 
getting stronger and is losing support in the North Indian 
"Hindi belt."  In his view, Congress will require a full 
five-year term to rebuild and strengthen its base before 
calling another poll. 
 
The Vision for India 
-------------------- 
 
12.  (C) When asked whether the Communists had a vision for 
India, Karat replied that they were "wary of grand visions." 
However, the Left parties want to implement land reform 
throughout the country, which would be nothing less than an 
"agrarian revolution."  He asserted that many of India's 
development problems stem from its failure to enact land 
reform, leading to "unequal agrarian relations" and "skewed" 
rural development.  Karat defined land reform as the strict 
enforcement of land ceilings and the distribution of land to 
the landless. 
 
13.  (C) Karat noted that land reform was the "strength" of 
the CPI(M) in West Bengal, where it increased agricultural 
production, made the state into India's largest rice 
producer, and demonstrated that small farms can be 
productive.  He cited Kerala as an example of the progress an 
Indian state can make when land reform is coupled with 
investments and inputs, contrasting Kerala's performance with 
Uttar Pradesh, which has one of "India's most corrupt 
bureaucracies," and all policies are hampered by the caste 
factor. 
14.  (C) The Charge pointed out that developing countries 
benefit from investment in basic health and primary and 
secondary education and that USAID has large health programs 
in India.  Karat agreed, noting that the Communists were 
pushing the GOI to increase spending in both sectors, 
especially in the rural areas. 
 
15.  (C) The Charge hoped that the Embassy and the CPI(M) 
could maintain regular contact and discuss the issues.  Karat 
agreed and hoped to see more of the Embassy in the future. 
 
Comment 
------- 
 
16.  (C) Karat is a skillful political leader who can walk a 
fine line and draw subtle distinctions in policy.  Relatively 
young, he will be a powerful figure on the Indian political 
scene for years to come, and could play an increasingly 
important role in the formation of future Indian governments. 
 While reassuring the USG of friendly intentions and a desire 
for good US-India relations, Karat made it clear that the 
Communists would oppose the US on a number of issues that 
matter to the USG such as some FDI, privatization, missile 
defense and military to military relations.  Karat is aware 
that the Communists are more influential than ever, and 
appeared determined to demonstrate that they take their role 
seriously and would not seek confrontation, while continuing 
to pursue their policy objectives.  Clearly welcoming this 
chance to open a dialogue with the US, Karat was serious 
about future meetings and interested in discussing issues as 
they arise. 
BLAKE