US embassy cable - 05NEWDELHI6846

C O N F I D E N T I A L SECTION 01 OF 02 NEW DELHI 006846 
 
SIPDIS 
 
E.O. 12958: DECL: 09/05/2015 
TAGS: PGOV, EINV, EFIN, ECON, PREL, ELAB, IN, Indian Domestic Politics 
SUBJECT: GOI MINISTER: NO THIRD FRONT, UPA TO PUSH FOREIGN 
RETAIL INVESTMENT 
 
REF: NEW DELHI 6637 
 
Classified By: A/DCM Geoff Pyatt, for Reasons 1.4 (B, D) 
 
1.  (C) Summary: GOI Minister and Congress leader Jaipal 
Reddy told A/DCM on September 2 that the US-India 
relationship was welcomed "across the political spectrum" in 
India, despite some insincere sniping from the opposition. 
While the Left Front has staked out opposition to some UPA 
efforts, it will not obstruct issues it cannot win, because 
it is too committed to the UPA government.  Reddy speculated 
that West Bengal CM Buddhadeb Bhattacharjee will be the 
future Communist Party of India (Marxist) (CPM) leader, and 
dismissed the possibility that the CPM would split from the 
UPA to form a third front with regional parties.  Congress 
leadership, hoping to make progress on financial reform after 
several false starts, believe that the government can open 
the retail sector to foreign investment.  End Summary. 
 
All Welcome US-India Agreement 
------------------------------ 
 
2.  (C) Congress Party leader and Minister for Information 
and Broadcasting Jaipal Reddy said that politicians "across 
the spectrum" welcomed the US-India joint statement following 
PM Singh's July Washington visit.  The BJP and Left had 
chosen to posture in opposition instead of taking credit for 
their part in the transformed relationship, but Congress 
might have done the same in opposition, Reddy admitted.  The 
BJP did not oppose the agreements out of principle, he said, 
so their complaints have fallen flat. 
 
Left Front Committed to UPA; No Third Front 
------------------------------------------- 
 
3.  (C) Although the Left has grumbled about the US-India 
relationship, the UPA has staked out such an inflexible 
position in this area that the Left has no choice but to go 
along, Reddy said.  They cannot oppose the agreement 
successfully without withdrawing support from the government, 
which they will not do.  The Left Front leadership 
"indicates" to the UPA where it can yield and where it will 
not, Reddy reported, but will not in any case defect to a 
"third front" with regional parties as they know it would not 
be viable.  Although the BJP is now in disarray, Reddy 
conceded it would "get its act together" if the government 
fell due the Left Front, and the strong anti-incumbency 
sentiment in Indian politics could benefit the BJP in an 
election to the detriment of the Congress and Left. 
 
4.  (C) The Left's "accomplishment" overall has been to slow 
the pace of economic reform, but not stop it, Reddy stated. 
The CPM has to echo the positions of the trade unions who are 
the source of its funding, but any leader who has had to 
rule, like West Bengal's former and current Chief Ministers 
Jyoti Basu or Buddhadeb Bhattacharjee, knows how difficult it 
is to follow the Left's full-employment schemes.  Even 
"sloganists" in the CPM know that their slogans are 
impractical, Reddy commented. 
 
UPA's Reform Agenda: Retail Next 
-------------------------------- 
 
5.  (C) After conceding to the Left's redlines on 
disinvestment and earning its approval on the recently-passed 
rural employment guarantee bill (reftel), Reddy stated that 
the UPA would turn to liberalization in the retail sector, 
including opening to foreigners, as the next reform area. 
The Left Front has signaled that it would not obstruct this 
area, unlike the more sensitive (to the CPM) issues of 
disinvestment.  COMMENT: The BJP, however, will put up a 
fight on behalf of small traders, many of whom support the 
party.  END COMMENT. 
Congress Will Lose Kerala to CPM 
-------------------------------- 
 
6.  (C) Reddy admitted that in addition to winning the 2006 
legislative assembly elections in West Bengal, the Communists 
would likely win in Kerala at the expense of Congress.  The 
Congress Party does not see even a chance of defeating the 
CPM.  Bhattacharjee will be the future CPM national chief, he 
speculated, noting that ultimately the pragmatic reform 
ideology of Bhattacharjee's West Bengal branch of the CPM 
would prevail in the party, but it would take time for the 
institution to change its position. 
 
7.  (C) The media perception of current CPM Prakash Karat as 
an ideological hardliner is not correct, Reddy stated.  Karat 
understands economics, but he is professing a hardline 
Communism in order to fight the elections in West Bengal and 
Kerala.  Karat also understands that his current Left Front 
share in the Lok Sabha is "unprecedented," and unlikely to be 
repeated, Reddy added, and will not risk his influence by 
bringing down the UPA government. 
 
Comment: Smooth Sailing for Congress 
------------------------------------ 
 
8.  (C) Despite recent media spotlight on the disagreements 
between the Congress and its Left Front supporters, Reddy's 
optimism suggests that the Congress leadership believes that 
it will be able to push forward its agenda of strengthened 
ties with the US and moderate advances in domestic economic 
reform.  Although the UPA is undeniably disappointed at 
losing battles with the Left over disinvestment in public 
sector undertakings, it seems to have reached an 
accommodation with the Left parties to avoid certain sacred 
cows in exchange for permission to tinker with the remaining 
areas for economic liberalization. 
 
9.  (U) Visit New Delhi's Classified Website: 
(http//www.state.sgov/p/sa/newdelhi) 
MULFORD