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N-deal, elections on menu post Budget

india Updated: Feb 29, 2008 19:17 IST

Reuters
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Congress has strengthened its hand against the opposition and Left allies with a farmer-friendly Budget, raising a chance of early elections and reviving hope for a controversial nuclear deal.

Congress leaders had been reluctant to push forward the civilian nuclear cooperation deal with the United States in the face of staunch opposition from their communist allies, who had threatened to bring down the coalition over the issue.

US officials warned this month that time was fast running out for the deal, which would end decades of nuclear isolation for India and allow it to access international nuclear fuel and equipment.

Many analysts had all but written the agreement off.

But Finance Minister Palaniappan Chidambaram upset those calculations on Friday with a budget aimed squarely at elections and India's rural poor, with a $15 billion scheme to waive loans held by 40 million small farmers.

Elections have to be held by May 2009, but Congress now has less to fear from an earlier vote, analysts say, meaning its leader Sonia Gandhi might just call the Left's bluff over the nuclear deal.

"It's a pre-election Budget, a Budget with an eye for early elections, but whether or not they will go for it I don't know," said Mahesh Rangarajan, a political analyst and history professor at Delhi University.

"Sonia Gandhi has to make the decision."

Newspapers reported on Friday that the government was close to concluding a nuclear safeguards agreement with the International Atomic Energy Agency in Vienna, a crucial step in tortuous negotiations over the agreement.

The deal would also need to be ratified by the 45-nation Nuclear Suppliers Group and go back to the US Congress for final approval, in good time before America's own elections in November.

Supporters of the deal like nuclear expert RR Subramanian were in good spirits.

"This is nothing short of an election budget," he said.

"They have virtually said goodbye to the Left. The nuclear deal will be done by July and elections will be in October. This budget clearly indicates the deal has been saved."

But others said a lot still needed to be done on the nuclear deal in a short space of time.

"It's 5 to 12 as far as many people are concerned," said one Western diplomat, "but I think it could go through."

"They may have left it too late, but there is obviously one last bid to push it through," said political analyst and columnist Prem Shankar Jha.

Early Elections?

Jha said the communists would be reluctant to side with the Hindu-nationalist opposition and bring the government down if the deal went ahead, but others disagreed.

"I think the Left will certainly do everything in their power to prevent the nuclear deal from going through," said Jayati Ghosh, a left-leaning political analyst. "They will definitely pull down the government then."

There are other reasons to think early elections, perhaps around October, are a distinct possibility, analysts said. The economy's breakneck pace of growth is already easing and a global slowdown could spell more trouble ahead.

A National Pay Commission is expected to recommend significant pay rises for three million government workers in a report due by end March. Chidambaram made no budgetary provision for pay rises but indicated he would support.

"I am confident the report will meet the legitimate expectations of government employees," he said.

It will be tempting to cash in at the polls, and let the next government worry about balancing the books, analysts said.

Rangarajan said Congress leader Sonia Gandhi looked weak when she appeared to buckle under communist pressure last year over the nuclear deal, and could restore some political credibility by pushing it forward now.

But he and other analysts said Congress could still face a tough time at the polls, whenever they are called.

The loan waiver will not cover tens of millions of farmers in debt to private money lenders, many paying extortionate rates of interest, while the economic boom is still bypassing hundreds of millions of poor people.

Congress also has formidable organisational and leadership problems and has lost several state elections to a resurgent opposition in recent months.

"I still have great suspicion that Congress is heading for a very difficult election," Rangarajan said.