How Sonia Gandhi was persuaded to back reforms
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Sonia
Gandhi has no official government post, but as Congress party president
and torchbearer of India's widely revered first family, she has the
last word on big policy issues
NEW
DELHI: It had been a brutal August for India's Congress party: economic
growth was wilting, the monsoon rains were failing and the opposition
had it cornered on yet another corruption scandal.
In stepped Sonia Gandhi to revive the morale of the ruling party's lawmakers, exhorting them at a meeting to "stand up and fight, fight with a sense of purpose and fight aggressively". It was a stunningly assertive speech from the normally temperate matriarch of a dynasty that has ruled India for most of its post-independence era.
And yet few at the gathering were aware that just a week earlier she had performed an even more dramatic about-face, agreeing to a raft of economic reforms that would be unveiled on Sept. 13 and 14.
Gandhi has no official government post, but as Congress party president and torchbearer of India's widely revered first family, she has the last word on big policy issues: and for her, social welfare has always come before liberalising the economy.
However, more than a dozen officials and party leaders close to the secretive inner circle of the Italian-born leader told Reuters that Gandhi was persuaded of the need for urgent action to avert a repeat of the crisis that took India to the brink of bankruptcy in 1991.
"This time there was a very grim scenario," said Rashid Kidwai, a Sonia Gandhi biographer who was given an account of the arguments made over weeks by Prime Minister Manmohan Singh and his new finance minister behind the closed doors of colonial-era government bungalows in New Delhi and even on a plane journey.
"It's not that she wanted to go for all this, but it was made very clear to her that, if she didn't, there would be far more dire consequences," Kidwai said.
Sources said the trigger for the reform campaign in Asia's third-largest economy came with the return of P. Chidambaram as finance minister on Aug. 1.
An eloquent Harvard-educated technocrat with a track record as a reformer, he replaced Pranab Mukherjee, a left-of-centre Congress stalwart who had consistently warned Gandhi against radical reforms that could cost the party votes.
"Pranab was from the old school of Indian politics," said a senior government official, who spoke on condition of anonymity. "The prime minister and the finance minister had to persuade Mrs. Gandhi that good economics was good politics."
Her acquiescence in the end led to this month's "big bang Friday" when, a day after taking an axe to costly subsidies on diesel, the government announced that the retail market would be opened to foreign supermarket chains and the bar on foreign investment in both airlines and broadcasters would be lifted.
In sum, these were the most sweeping reforms since Singh took office in 2004 and - in the space of 48 hours - they dispelled the image of a prime minister who was losing his mojo as India's high-trajectory growth faltered.
A RELUCTANT REFORMER
However, insiders say Gandhi remains instinctively wary of economic liberalisation and trimming the budget deficit. For months, she had held out against cutting fuel subsidies that are aimed at the poor and the country's rural majority, fearing the impact on the Congress party's fortunes.
She only agreed when Singh and Chidambaram spelled out that new growth generated by reforms and improved investor sentiment would have a trickle-down effect and provide funds for welfare spending in time for elections due by mid-2014.
"They explained to Mrs. Gandhi that social benefits for the poor will need deep pockets," said a Congress party source who declined to be named because the discussions were confidential.
Reuters reviewed more than 30 letters written by Gandhi to the prime minister and U.S. diplomatic cables released by WikiLeaks that portray her as passionate about social issues, and attached to protecting the poor.
That means the sudden burst of reforms could be cut short if Gandhi - who Forbes magazine ranks as the world's sixth most powerful woman - sees no benefits for the rural poor on whom her party relies for votes.
Indeed, party sources said she will now focus on passing a bill on universal food security in December, a populist plan that would cost billions of dollars at a time when her government is under intense pressure to rein in spending.
In stepped Sonia Gandhi to revive the morale of the ruling party's lawmakers, exhorting them at a meeting to "stand up and fight, fight with a sense of purpose and fight aggressively". It was a stunningly assertive speech from the normally temperate matriarch of a dynasty that has ruled India for most of its post-independence era.
And yet few at the gathering were aware that just a week earlier she had performed an even more dramatic about-face, agreeing to a raft of economic reforms that would be unveiled on Sept. 13 and 14.
Gandhi has no official government post, but as Congress party president and torchbearer of India's widely revered first family, she has the last word on big policy issues: and for her, social welfare has always come before liberalising the economy.
However, more than a dozen officials and party leaders close to the secretive inner circle of the Italian-born leader told Reuters that Gandhi was persuaded of the need for urgent action to avert a repeat of the crisis that took India to the brink of bankruptcy in 1991.
"This time there was a very grim scenario," said Rashid Kidwai, a Sonia Gandhi biographer who was given an account of the arguments made over weeks by Prime Minister Manmohan Singh and his new finance minister behind the closed doors of colonial-era government bungalows in New Delhi and even on a plane journey.
"It's not that she wanted to go for all this, but it was made very clear to her that, if she didn't, there would be far more dire consequences," Kidwai said.
Sources said the trigger for the reform campaign in Asia's third-largest economy came with the return of P. Chidambaram as finance minister on Aug. 1.
An eloquent Harvard-educated technocrat with a track record as a reformer, he replaced Pranab Mukherjee, a left-of-centre Congress stalwart who had consistently warned Gandhi against radical reforms that could cost the party votes.
"Pranab was from the old school of Indian politics," said a senior government official, who spoke on condition of anonymity. "The prime minister and the finance minister had to persuade Mrs. Gandhi that good economics was good politics."
Her acquiescence in the end led to this month's "big bang Friday" when, a day after taking an axe to costly subsidies on diesel, the government announced that the retail market would be opened to foreign supermarket chains and the bar on foreign investment in both airlines and broadcasters would be lifted.
In sum, these were the most sweeping reforms since Singh took office in 2004 and - in the space of 48 hours - they dispelled the image of a prime minister who was losing his mojo as India's high-trajectory growth faltered.
A RELUCTANT REFORMER
However, insiders say Gandhi remains instinctively wary of economic liberalisation and trimming the budget deficit. For months, she had held out against cutting fuel subsidies that are aimed at the poor and the country's rural majority, fearing the impact on the Congress party's fortunes.
She only agreed when Singh and Chidambaram spelled out that new growth generated by reforms and improved investor sentiment would have a trickle-down effect and provide funds for welfare spending in time for elections due by mid-2014.
"They explained to Mrs. Gandhi that social benefits for the poor will need deep pockets," said a Congress party source who declined to be named because the discussions were confidential.
Reuters reviewed more than 30 letters written by Gandhi to the prime minister and U.S. diplomatic cables released by WikiLeaks that portray her as passionate about social issues, and attached to protecting the poor.
That means the sudden burst of reforms could be cut short if Gandhi - who Forbes magazine ranks as the world's sixth most powerful woman - sees no benefits for the rural poor on whom her party relies for votes.
Indeed, party sources said she will now focus on passing a bill on universal food security in December, a populist plan that would cost billions of dollars at a time when her government is under intense pressure to rein in spending.
Pruyanka Kumari-PGDM-3
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