Several simmering political developments have come to a head in the past few weeks, diverting some of the GOI's attention from foreign policy issues such as Iran, the US-India civil-nuclear agreement and the POTUS visit.

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SIPDIS

SIPDIS

E.O. 12958: DECL: 01/27/2016 TAGS: PGOV, PREL, PINR, IN

SUBJECT: POLITICAL CHALLENGES COMPLICATE AND DIVERT CONGRESS ATTENTION FROM FOREIGN POLICY

REF: A. NEW DELHI 552 B. NEW DELHI 546 C. 05 NEW DELHI 8844 D. 05 NEW DELHI 7909

Classified By: DCM Bob Blake Jr., for reasons 1.4 (B,D)

1. (C) Summary: Several simmering political developments have come to a head in the past few weeks, diverting some of the GOI's attention from foreign policy issues such as Iran, the US-India civil-nuclear agreement and the POTUS visit. The January 24 ruling by India's Supreme Court that the UPA dissolution of the Bihar government in May 2005 was unconstitutional combined with the impending collapse of the Congress-dominated coalition government in Karnataka, have presented India's ruling party with serious domestic challenges. These Congress missteps have presented the opposition BJP/NDA with political opportunities. The BJP/NDA is set quickly to form a government in Karnataka and have called on Prime Minister Manmohan Singh and Congress President Sonia Gandhi to accept responsibility for the SC judgment and resign, although they will not. The January 22 Congress leadership meeting in Hyderabad underscored the inherent weaknesses in party culture that make it difficult for Congress to address these challenges. Congress inability to reach out to the masses in India's Hindi heartland (Reftel A), continued dependence on the Gandhi family for leadership, and behind the scenes backbiting and squabbling are likely to prevent the party from mounting a cohesive and timely response as it faces likely electoral defeats in several key state assembly elections in 2006. While the opposition has been energized by these developments, few expect the UPA government to fall and most expect it to serve out a full term. Meanwhile, PM Singh's attention to pressing foreign matters will necessarily be diluted until these domestic pressures subside. End Summary.

Karnataka's Government Unravels

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2. (C) Congress missteps have come home to roost (reftel B), forcing the party to engage in damage control and diverting its attention away from other pressing business of state. In Karnataka, Congress hubris and inability to effectively manage a coalition government will likely lead to its collapse. In May 2004, Congress and the Janata Dal(S) combined to form a coalition government in Karnataka. Although the two parties were not close, they argued that the alliance was necessary to keep the ""communal"" BJP out of power. In a surprise development, HD Kumaraswamy, the son of JD(S) president and former Prime Minister Dewe Gowda, on January 18 led a majority of his party's MLAs into an alliance with the BJP and staked his claim to form the government. Although the JD(S) and BJP are scheduled to prove their majority on January 27, most observers believe they have an unassailable majority and a new government in Karnataka is inevitable. Should the BJP come to power as expected, this will be the first time that it has formed a government in South India and will be an embarrassing setback for Congress.

The Supreme Court Rules Against Congress

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3. (U) On January 24, the Supreme Court released its long-awaited judgment regarding the constitutionality of the UPA dismissal of the Bihar government in May 2005. The UPA-appointed governor Buta Singh argued that dismissal was

NEW DELHI 00000613 002 OF 003 necessary to prevent the BJP from buying legislators with ""monetary inducements."" The SC rejected this argument, ruling that the governor acted without presenting evidence and on the basis of ""mere perception."" Deriding the dismissal as ""destructive of the democratic system"" and ""drastic and extreme,"" three of the five justices declared that the ""Court could not remain a silent spectator to such subversion of the Constitution."" The SC pointed out that the UPA should have ""exercised caution,"" and urged the GOI to appoint ""non-political"" governors in the future.

4. (C) Noting that ""A ruler who says he was misled does not deserve to be a rule"" BJP General Secretary Arun Jaitley demanded the immediate resignation of PM Singh, Sonia Gandhi and the entire cabinet. Speaking for the NDA Janata Dal(U) President George Fernandes supported the BJP demands and accused PM Singh of deliberately misleading President Kalam into ""committing an unconstitutional act."" Congress did not immediately dismiss the governor or present a focused rebuttal. PM Singh stated that he ""accepted and respected,"" the adverse ruling. Congress spokesman Abhishek Singhvi noted that the party would accept the ruling with ""humility,"" but claimed that it did not find fault with the UPA Cabinet or leadership. Buta Singh resigned on January 26, after accepting the Republic Day flag salute. The opposition was quick to assault Congress for its failure to insist on Singh's resignation before the holiday.

Congress Slow off the Mark

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5. (C) Congress inability to mount a quick or coherent response to these challenges reflects inherent weaknesses in its party structure and culture, which were evident in the party's January 22 leadership session in Hyderabad. From the outset, the 10,000 party leaders and workers went to extraordinary lengths to demonstrate their sycophantic loyalty to the Gandhi family. Although Sonia Gandhi requested that such demonstrations be held to a minimum, participants staged disruptive demonstrations demanding that the party induct Rahul Gandhi into the leadership and provide him a space on the podium. In her address, Mrs. Gandhi pointed out once again that Congress must revive its strength in the Hindi heartland. Rahul rejected arguments that the Congress loss of its North Indian power base demonstrated the party's failure to master caste politics. Instead, he urged Congress to mobilize its ""youth power"" and energize its dormant cadre and declined, for the time being, to accept a post in the Congress leadership.

Comment: Weakened but Secure

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6. (C) Congress weaknesses have become evident since its 2004 ascent to power in New Delhi. In the crucial Hindi belt, its elitist leadership (including Sonia Gandhi and her children) are unwilling to go into the countryside to engage with the masses and regain their loyalty. Inside the party, there is an over-reliance on the Gandhi brand to solve all problems. The insistence on outward displays of loyalty to the Gandhis has prevented the emergence of a strong and credible second tier leadership capable of mounting effective state-wide campaigns in crucial states like Uttar Pradesh and Karnataka. The coterie surrounding the Gandhis believe that public loyalty to ""Madam"" gives them a license to backbite and squabble behind the scenes. The party leadership in Karnataka arrogantly dismissed JD(S) attempts to share power, insisting that Congress should predominate. Even now, with

NEW DELHI 00000613 003 OF 003 the government falling, unrepentant Congressmen in the state insist that Congress should hand over power to the BJP and join the opposition rather than make concessions to its coalition partner. These inherent defects are likely to result in poor showings in upcoming state assembly elections. Pundits predict that the Left parties will trounce Congress in West Bengal and Kerala and that the BJP/NDA will likely defeat the Congress-led coalition in Orissa. These losses would follow the fall of Congress-dominated governments in Bihar, Jharkhand and now Karnataka.

Holding on to Power - But Distracted

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7. (C) Despite these recent jolts and the expected electoral defeats, the UPA is not in danger of falling. Most observers expect the party to remain in power for a full term and this has been borne out by recent polling data (Reftel B). However, Congress has demonstrated that it is incapable of quickly making the corrections necessary to address its failings and get back on course. The party is likely to scramble for some time before devising an appropriate response to fast-breaking events. In an era of finely-balanced coalition government, domestic political concerns remain the top priority of every Indian political party, including Congress. Domestic political challenges could distract the party and make the UPA government more cautious than normal in grappling with foreign policy issues in the run-up to the President's March visit.

8. (U) Visit New Delhi's Classified Website: (http://www.state.sgov.gov/p/sa/newdelhi/)

MULFORD "