As the competition for BJP leadership heats up, Jaitley will enjoy the advantages of a telegenic personality and strong ties to the New Delhi establishment.

32279 5/10/2005 10:14 05NEWDELHI3505 Embassy New Delhi CONFIDENTIAL "This record is a partial extract of the original cable. The full text of the original cable is not available." "C O N F I D E N T I A L SECTION 01 OF 02 NEW DELHI 003505

SIPDIS

E.O. 12958: DECL: 03/30/2015 TAGS: PGOV, PHUM, PINR, ECON, IN, Indian Domestic Politics, Indo-US

SUBJECT: BJP LEADER REAFFIRMS US-INDIA COMMITMENT

Classified By: Charge Robert O. Blake, Jr., for Reasons 1.4 (B, D)

1. (C) Summary: BJP spokesman and former Commerce Minister Arun Jaitley warned us recently that the Modi controversy continues to fester among the party rank and file, who see the Chief Minister's visa revocation as a personal attack on a leader of the party that began the transformation of US-India relations. One of several aspirants to direct the next generation of BJP leadership, Jaitley was otherwise upbeat on the US-India relationship, and quietly confident that the party would eventually find its feet. End Summary.

2. (C) In an May 6 meeting with the Charge and PolCouns, a relaxed and self-assured Arun Jaitley predicted that current BJP President LK Advani would lead for another two to three years, after which one of five next generation leaders (Jaitley among them) would take the reins. Dismissing the speculation about Advani's successor as being no more relevant than predictions about Gordon Brown's accession to power in the UK, Jaitley argued that the BJP remained a force to contend with in Indian politics, notwithstanding the party's current public squabbling. Pressed on the question of Hindutva, Jaitley argued that Hindu nationalism ""will always be a talking point"" for the BJP. However, he characterized this as an opportunistic issue. In India's northeast, for instance, Hindutva plays well because of public anxiety about illegal migration of Muslims from Bangladesh. With the recent improvement of Indo-Pak relations, he added, Hindu nationalism is now less resonant in New Delhi, but that could change with another cross-border terrorist attack, for instance on the Indian Parliament.

3. (C) Jaitley was upbeat on the US-India relationship, emphasizing that ties with the US are no longer a point of controversy in Indian politics. Citing his own situation as typical, Jaitley noted that he has several nieces and sisters living in the US, ""and five homes to visit between DC and New York."" Despite this upbeat context, Jaitley was distressed about the US visa denial to Gujarat Chief Minister Narendra Modi, complaining that he could not understand how the US could take such an action against the party that began the transformation of US-India relations. Charge explained the rationale and legal basis for the US decision. Jaitley agreed with the Charge's point that Modi was a polarizing personality, but argued that it would have been better for the US to let the Chief Minister visit the US, where he would have attracted a few demonstrators and then nothing more would be said. Regardless of US explanations, Jaitley warned, the Modi decision has hurt the US reputation among BJP rank and file.

4. (C) Reflecting on several weeks spent in Bihar leading the BJP's state election campaign, Jaitley expressed concern about growing gaps in the quality of governance across India. Virtually all new investment, he argued, is concentrated in the four southern states, two western states (Gujarat and Maharashtra) and ""within 100 kilometers of Delhi."" He lamented the ""Robin Hood"" syndrome that prevails in Bihar, arguing that caste politics lend a ""social sanction"" criminalization of politics that drives away investment. Recalling helicopter flights over Bihar, Jaitley described an economic desert, with brick kilns constituting virtually the only form of industrial infrastructure. He also decried -- but sympathized with -- the mass exodus of Bihari professionals from that state to cities like Delhi and Mumbai, and to the ranks of the Indian Administrative Service.

5. (C) Putting on his hat as a former Commerce Minister, Jaitley confessed that the BJP's opposition to a Value Added Tax (VAT) at the state level was based on a narrow political calculus, and predicted that the BJP states would adopt the VAT soon in order to protect their revenue streams. He gave the Congress government generally positive marks for its handling of economic policy issues, but focused on the contradictions inherent in the UPA coalition. Jaitley was relatively relaxed in response to the Charge's pitch for opening of the Indian services sector. He agreed that legal services should be opened to foreign competition, noting that the performance of the Indian bar has begun to improve, even though the quality of judges suffers from a ""Gandhian"" mindset that leads to unreasonably low salaries. On retail, he argued that foreign competition should not seriously hurt the mom and pop stores that form a BJP constituency. However, he suggested that opening up to big retail chains like Wal-Mart should proceed slowly, since large Indian retailers are just now coming into their own.

6. (C) Comment: Although visibly pained by the Modi visa revocation, Jaitley was gracious and open throughout. He clearly values his personal and commercial connections to the US (several US corporates are legal clients). As the competition for BJP leadership heats up, Jaitley will enjoy the advantages of a telegenic personality and strong ties to the New Delhi establishment. However, as reflected in his remarks here about Hindutva, Jaitley's credentials with the Sangh Parivar are weak, and he may not have what it takes to mobilize the BJP base.

BLAKE