Coalition Government Survives No-Confidence Vote in Indian Parliament

The ruling Indian National Congress (INC)-led UPAcoalition government survived a no-confidence motion in the Lok Sabha (lower house of the parliament) in India yesterday (22 July). The UPA secured 275 seats in the 543-seat parliament, which was a slim simple majority over the 272 votes needed and the 256 votes against the ruling coalition. The number of abstentions is not known. After the vote, Prime Minister Manmohan Singh told reporters that "this has sent an important message to the world that India is ready to take its rightful place in the committee of nations" while Finance Minister P. Chidambaram noted that the government would now “move ahead on economic and social reforms.” The partially convertible Indian rupee appreciated to a seven-week high while Mumbai stock exchange Sensex was up by 4% following the parliamentary vote.

The two-day debate leading up to the vote was marred by tensions amid allegations of cross-voting, bribery, as well as both sides relying on MPs serving prison sentences and with ailing health to secure the necessary number of seats to secure a parliamentary majority (see India: 16 July 2008: Government Hit by Corruption Allegations Ahead of Confidence Vote in India). Notably, three MPs from the main opposition Hindu nationalist Bharatiya Janata Party (BJP) waved 30 million rupees (US$715,000 dollars) in cash yesterday (22 July), claiming that this was what they had been paid by the Congress Party to abstain or vote in favour of the ruling coalition. Parliamentary speaker Somnath Chatterjee ordered the New Delhi police to investigate the bribery claims, calling the claims of corruption a "sad day in the history of parliament." There were also allegations that the vote-counting machine had incorrectly tabulated the results, requiring a hand count of some of the votes.

The United States welcomed the outcome although it warned that the deal still faced a tight timetable for approval, with ratification of a nuclear safeguards agreement by the 35-member board of the International Atomic Energy Agency (IAEA) on 1 August, a waiver on conducting nuclear commerce from the 45-nation Nuclear Suppliers Group (NSG), and U.S. congressional ratification ahead of presidential elections in the United States in November.

The vote of confidence was triggered by the withdrawal of support by the four-party Left Front from the UPA government over its opposition to the U.S.-India nuclear agreement, which led the ruling coalition to lose its parliamentary majority (see India: 8 July 2008: Left Parties Withdraw Support for Ruling Coalition in India). The Congress Party was able partially to compensate for the loss of Left Front support by drawing on support from its former rival the Samajwadi Party.

The opposition to the nuclear agreement came from numerous fronts:

• on the ideological front, the leftist parties argued that the deal wedded India too closely to the United States, thus sacrificing India’s traditionally non-aligned foreign policy;
• the scientific community also questioned the importance of nuclear power to India’s growing energy needs, given that it comprises only 3% of the country’s energy consumption at present, which remains dominated by coal (which accounts for 50% of India’s energy consumption) and oil (which accounts for one-third of the country’s energy consumption, of which over 70% is imported);
• the strategic community claimed that the nuclear deal would sacrifice India’s “strategic autonomy” and “independent foreign policy” with India’s rapprochement with the United States coming at the cost of its long-standing relationship with Iran, Russia, and other traditional allies as well as sacrificing the proposed Iran-Pakistan-India natural gas pipeline. They also noted that India’s nuclear weapons programme would be compromised by restrictions on its ability to conduct future nuclear tests and reprocess spent fuel for plutonium for the country’s second-generation fast breeder reactor program. Under the United States-India Peaceful Atomic Energy Co-operation Act or Hyde Act, which was signed in March 2006, India will open its civilian nuclear reactors to international inspection in exchange for civilian nuclear technology and nuclear fuel; and
• finally, there were opportunistic opponents to the nuclear agreement, such as the BJP, which saw eye-to-eye with the Congress Party on its rapprochement with the United States, but wanted to undermine the deal in order to claim credit for it later on if it led a new government.

Outlook and Implications

Gamble Pays Off

The Congress Party took a major political gamble in proceeding with the nuclear deal in the absence of Left Front support. Notably, the nuclear deal was not a major electoral issue in Indian politics, which remains dominated by local issues, notably rising food and fuel prices, which has fuelled double-digit inflationary pressures (see India: 21 July 2008: Inflation Continues to Accelerate in India During June). Optimally, the Congress Party would like to prevent holding early parliamentary elections before the end of its term in May 2009 until it can quell inflationary pressures through a strong monsoon harvest and show a strong performance in a string of state elections in Rajasthan, Madhya Pradesh, Chhattisgarh, Jammu and Kashmir, and Delhi.

Rise of Third Front, Reorientation of Foreign Policy

Yesterday’s vote made two revelations at the domestic and international level. At the domestic level, the vote highlighted the rise of a “third front” in Indian national politics from the Congress Party-led UPA and BJP-led National Democratic Alliance (NDA). This came in the form of sub-national parties such as the Left Front and Bahujan Samaj Party (BSP), as part of the United National Progressive Alliance (UNPA) and Samajwadi Party, which are not only emerging as “kingmakers” in national politics, but also developing the ability to set agendas at the national and international level. On the international level, yesterday’s vote was essentially over India’s place in the world. The rare parliamentary debate on foreign policy divided the country between those who want to maintain India’s traditionally non-aligned status versus those wanting to wed India closer to the United States through the nuclear agreement.

Economic Reforms Revitalised

The ability of the UPA government to continue without the Left is likely to be a boon for the government’s pursuit of economic liberalisation reforms, especially to the pension, insurance, and banking sectors, which had been stalled by opposition from the Left. Potential reforms to be considered at the start of the next parliamentary session in August include raising the foreign investment limit for the insurance sector from the current 26% to 49%, increasing the voting rights of investors in private banks, and improvements to the operations of the country’s largest lender, the State Bank of India. World Trade Organization talks in Geneva, Switzerland, which had been stalled by the absence of Indian Commerce Minister Kamal Nath, have also been reinitiated.

Over the longer term, the nuclear deal could serve to bring much-needed investment into India’s dilapidated power sector and ensure the country’s growing energy needs. The U.S. Chamber of Commerce has noted that the deal will grant U.S. companies up to US$100 billion in business, while other countries, such as France and Russia are also looking to access the growing nuclear power market in India.

Not out of the woods

Nonetheless, the Congress-led UPA government is not out of the woods. The fact that some of the votes secured in winning the no-confidence motion were based on alliances of convenience rather than of ideology or purpose makes the coalition highly unstable and prone to further fracturing. Allegations of vote-buying by the Congress Party may also tarnish the “Mr Clean” image of Prime Minister Manmohan Singh.