Heir apparent Rahul Gandhi continues to languish with little popular support, but we are told that his mother remains determined to install him as PM at the ""appropriate"" time.

82135 10/17/2006 12:33 06NEWDELHI7153 Embassy New Delhi CONFIDENTIAL "VZCZCXRO1571OO RUEHBI RUEHCI RUEHLH RUEHPWDE RUEHNE #7153/01 2901233ZNY CCCCC ZZHO 171233Z OCT 06FM AMEMBASSY NEW DELHITO RUEHC/SECSTATE WASHDC IMMEDIATE 9598INFO RUEHBJ/AMEMBASSY BEIJING 4030RUEHLM/AMEMBASSY COLOMBO 7430RUEHKA/AMEMBASSY DHAKA 7511RUEHIL/AMEMBASSY ISLAMABAD 0510RUEHKT/AMEMBASSY KATHMANDU 8160RUEHMO/AMEMBASSY MOSCOW 0201RUEHKO/AMEMBASSY TOKYO 3917RUEHCI/AMCONSUL CALCUTTA 6775RUEHCG/AMCONSUL CHENNAI 6821RUEHKP/AMCONSUL KARACHI 5664RUEHLH/AMCONSUL LAHORE 3076RUEHBI/AMCONSUL MUMBAI 6050RUEHPW/AMCONSUL PESHAWAR 3697RUEAIIA/CIA WASHDCRHEHNSC/NSC WASHDCRUEIDN/DNI WASHINGTON DCRHHMUNA/CDR USPACOM HONOLULU HIRUCNDT/USMISSION USUN NEW YORK 2580RHMFISS/HQ USCENTCOM MACDILL AFB FLRUEHGV/USMISSION GENEVA 4888RHHMUNA/HQ USPACOM HONOLULU HIRHMFISS/HQ USSOCOM MACDILL AFB FLRUEKJCS/JOINT STAFF WASHDC" "C O N F I D E N T I A L SECTION 01 OF 05 NEW DELHI 007153

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/12/2016 TAGS: PGOV, ECON, EAGR, PINR, PREL, IN

SUBJECT: CONGRESS AT THE HALF WAY MARK - MORE CONFIDENT THAN EVER

Classified By: PolCouns Ted Osius for reasons 1.4 (B,D)

1. (C) Summary. At the halfway mark of the United People's Alliance (UPA) government, Congress Party Chief Ministers met late last month in Nainital to sort out internal issues. Congress emerged strong and confident, having patched-up feuds and solidified party support behind flagbearers PM Manmohan Singh and Party President Sonia Gandhi. PM Singh's performance reinforced the impression that his political star remains firm for now, while Mrs. Gandhi reaffirmed her position as one of India's most popular political leaders. With the opposition BJP in continued freefall, Congress is convinced that it faces no serious opposition and can ""handle"" any challenges presented by its troublesome Left Front (LF) partners. While the PM hopes to reshuffle the Cabinet and appoint a Foreign Minister, the issue was not resolved at the meet, and our sources tell us that the move has been put on hold until Mrs. Gandhi gives her assent. Heir apparent Rahul Gandhi continues to languish with little popular support, but we are told that his mother remains determined to install him as PM at the ""appropriate"" time. Although concerned that the US/India Civil Nuclear Agreement has not yet passed the US Congress, the UPA appears far from panicked. Congress subsequently revived the long-dead ""garibi hatao"" (eliminate poverty) campaign of Indira Gandhi, in an attempt to acquire some of the former PM's luster, but to little avail. Congress is confident, but has yet to rekindle enthusiasm in the Hindi heartland, where political fortunes are made or broken. End Summary.

Congress Faces its Internal Demons

----------------------------------

2. (C) One of the principal objectives of the Nainital conclave was to iron out internal differences that have lingered since the party came to power in 2004. Ruling in a coalition remains a new experience for many within the Congress old guard, while many are still uncomfortable with the idea that the party president and the Prime Minister are not the same person. This tension has played out in squabbling between the Congress functionaries who joined the government and those who remained with the party apparatus, with some of the PM's aides proclaiming their superiority to the party apparatchiks. There was lingering sentiment among the government types that the party had no business sitting in judgment on governmental policies.

3. (C) When the UPA assumed power in 2004, the Congress Party leadership was sensitive to accusations that Mrs. Gandhi was interfering with the Prime Minister, and was reluctant to dictate policy guidelines and ideological parameters to the government. To legitimize a role for Sonia Gandhi in policy determination, the Party devised the transparent stratagem of establishing a National Advisory Council. The move fooled no one, and criticism of Mrs. Gandhi continued largely unabated for the first year of UPA rule.

And May Be Ready To Move On

---------------------------

4. (C) After nearly two and one half years in power, much of this tension has dissipated, and this was very much in evidence at the September 23-24 Nainital meet. Many of the participants publicly acknowledged the need for synergy between the party and the government. At Nainital, the party extended unreserved support to the PM, with the Chief

NEW DELHI 00007153 002 OF 005

Ministers stating that party inputs do not have to be treated as irritants. The government types also demonstrated a new flexibility and willingness to take political considerations into account when devising policy, listening patiently for example to the Chief Ministers' concerns regarding the possible political fallout associated with the establishment of Special Economic Zones (SEZs).

5. (C) The Congress leadership also acknowledged that ideas and policies must be synchronized with ground realities and electoral compulsions, while not giving in to blatant populism. The politicians emphasized that the UPA must demonstrate sensitivity in policymaking, by aligning governance with the pains and aspirations of the masses. In a government that has been characterized by so much institutional division, the joyful bonding at Nainital appeared to lay the groundwork for new habits of partnership and cooperation.

Congress Reasserts the Importance of Agriculture

--------------------------------------------- ---

6. (C) The Nainital conclave was the fourth since 2001, and, as in similar such meetings, the party examined policy options. This year Sonia Gandhi and PM Singh asserted that agriculture and the rural population of India must be a top party priority. In her speech, Mrs. Gandhi made it clear that the GOI's economic reform policy could not succeed without taking India's large agricultural sector into account. This rural emphasis also reiterated the Party's determination not to repeat the BJP's mistake when it ran an unsuccessful 2004 ""India Shining"" election campaign, which appeared to be urban based and to ignore many rural concerns.

Let's Eliminate Poverty

-----------------------

7. (C) In a move that caught almost all political observers by surprise, Congress revived the ""garibi hatao"" (eliminate poverty) campaign of Indira Gandhi after the conclusion of the Nainital conclave. Indira used this slogan effectively in 1970 to decimate her opponents and win a landslide in the 1971 general election. Having served its purpose, the slogan quickly disappeared, and today 350 million Indians continue to live in absolute poverty. The attempt by the Sonia Gandhi iteration to co-opt the slogan was greeted with chagrin and has been mostly ignored. The political cognoscenti have determined that such gimmicks cannot be recycled and that it will likely disappear without a trace. In its October 17 editorial, the Hindu pointed out that Congress is now sending out mixed signals, telling middle class Indians to revel in their new-found prosperity, while urging the ""elimination"" of mostly rural poverty. By highlighting the existence of ""two Indias"" that are not sharing the benefits of economic growth, Congress has opened the door to embarrassment rather than energizing the electorate.

The Sonia/Manmohan Issue

------------------------

8. (C) Mrs. Gandhi's surprise refusal to become Prime Minister in 2004 and subsequent decision to hand the job to Manmohan Singh upset many political calculations and forced the Congress Party and the government to redefine their relationship. Although her move assuaged the many Sonia critics, both inside and outside the party, who did not like

NEW DELHI 00007153 003 OF 005

the idea of her becoming Prime Minister, they continued to nit-pick, accusing her of back-seat driving and assuming ""extra-constitutional"" authority. For her part, Sonia Gandhi seemed over-sensitive to such accusations and over-anxious to dispel them by going out of her way to give all due deference to PM Singh, and consistently rebuffing those who tried to create a distance between her and the Prime Minister.

Manmohan is Sonia's Choice

--------------------------

9. (C) Mrs. Gandhi moved strongly at Nainital to resolve this issue by asserting that she was the party standard bearer and was clearly in charge, PM Singh was on board with this arrangement, and she was fully supportive of his performance as PM. For example, at a press conference Gandhi and Singh sat side by side. Reporters asked the PM whether he was in f!vor of appointing a Deputy Prime Minister. Mrs. Gandhi took the microphone from Singh to answer the question herself, forcefully proclaiming that there would be no Deputy. For the past six months, the talk - sometimes in whispers, sometimes in conspiratorial suggestions - has been that the UPA would soon appoint a Deputy Prime Minister. The talk has been fueled by the ambition of senior Cabinet Ministers and implied that the Congress President was having second thoughts about Manmohan Singh. At Nainital, Mrs. Gandhi sent a loud and clear message to the Prime Minister's detractors - and there are many in Congress - that she remains firmly committed to his continued stewardship of the government. However, in doing so, she also somewhat undermined Singh by proving yet again that the ultimate authority rests with her, not him.

Rahul Gandhi Being Primed For PM

--------------------------------

10. (C) Despite his lackluster performance as an MP and politician, the Nainital conclave assigned Rahul Gandhi a critical role in party affairs. This reflects the wishes of Sonia Gandhi, who continues to be popular among the Indian public. Respondents to the September 4 India Today poll were asked who would make the best Prime Minister of India. Although Atal Bihari Vajpayee was the top choice, with 24 percent, Sonia Gandhi was number two, with 17 percent and Manmohan Singh number three, with 15 percent. In very poor health, Vajpayee can never be Prime Minister again. After Vajpayee, LK Advani, the closest BJP contender was far behind Sonia, with a mere four percent. Narendra Modi, who our BJP contacts tell us is the RSS choice for BJP standard-bearer in the post-Vajpayee era, polled a miserable two percent. Rahul Gandhi polled hardly better than Modi, with three percent. The BJP's poor performance in the poll is even more striking given India Today's pro-BJP bias.

11. (C) Despite her popularity, Congress insiders continue to assert to us that Sonia Gandhi has no intention of becoming Prime Minister and is determined to place Rahul in the job. In an October 11 meeting with Poloff, Sonia Gandhi confidant Rashid Alvi insisted that despite his lack of public appeal and political skills, Mrs. Gandhi will install her son as PM. Alvi pointed out that Rahul's ascension to the Gandhi family seat is not imminent, as it will ""take time"" for him to be made ready, but there is no doubt that that the party's fortunes are inextricably tied to the young man's presumed strengths and unexplored weaknesses.

A Cabinet Shuffle is Desirable but Uncertain

NEW DELHI 00007153 004 OF 005

--------------------------------------------

12. (C) Sonia Gandhi has to eventually revamp the party organization and reshuffle the Cabinet. Many Cabinet positions, including that of Foreign Minister, are vacant. Ideally, the two tasks should be accomplished simultaneously, but Manmohan Singh's inability to find a sufficiently strong candidate for Foreign Minister that everyone in the party leadership can agree on has delayed the process. Alvi asserted that Mrs. Gandhi has final say on Cabinet appointments, and has refused to take a decision.

""Managing"" the Left

-------------------

13. (C) With the BJP in freefall, the UPA's principal challenge continues to come from the Communist/Socialist parties in the Left Front (LF), who continue to provide the crucial support that keeps the UPA afloat, and have used their position to put major economic reform measures on hold. Though the Left parties are in the strong and powerful position of supporting the UPA while not belonging to it, the Congress leadership appears confident that they can ""manage"" the LF. Alvi maintained that the Communists will not pull the plug on the UPA regardless of their intense dissatisfaction with economic reform policies. They have never had it so good, he asserted, and will never be in such a position of strength again. Why would they willingly end this arrangement, only to be exiled back into the political wilderness, for ""where else do they have to go but to the UPA?"" he asked.

While the BJP is a Paper Tiger

------------------------------

14. (C) Alvi stated that Congress has dismissed the BJP and no longer views it as a credible threat. For example, he pointed out, the BJP has repeatedly attempted to gain traction both inside and outside of Parliament with nationalist and religious rhetoric (Muslim bashing, calling for the quick execution of Afzal Guru, Pakistan bashing, Musharraf bashing, criticizing the Civil/Nuclear agreement as a ""sellout to the US,"" calling for mandatory recitation of the Hindu/Nationalist poem ""Vande Mataram""), but has failed to arouse the public or be more than a minor irritant to Congress. Alvi pointed out that the BJP as a political party is on the decline across the nation, and has practically disappeared in what should be its Hindi heartland base in Uttar Pradesh and Bihar. He further noted that the BJP currently hold power on their own in only three states - Rajasthan, Gujurat and Madhya Pradesh, and that the most credible leader it has to project as Prime Minister is the widely-reviled Narendra Modi. Alvi conceded that the Congress government of Punjab will fall in the February 2007 elections, but emphasized that this will be a victory for the Sikh regional party the Akali Dal, with the Punjab BJP only a minor partner in a coalition government.

Congress Taking Hits on National Security

-----------------------------------------

15. (C) While Congress is currently taking hits for its insistence on cooperation with Pakistan on counter-terrorism, Alvi was confident that this policy tack would succeed over the long-term and benefit Congress. Musharraff, he asserted, has taken steps in the right direction by admitting that Pakistan has supported anti-India terrorism in the past and

NEW DELHI 00007153 005 OF 005

that rogue ISI officers may still be supporting the Taliban/Al Qaeda. To score maximum points, Musharraff must now demonstrate conclusively that Pakistan is no longer in the terrorism business. Such a move would strengthen the hand of Congress, help it to score political points, deprive the BJP of one of its principal issues and strengthen Congress support among Muslims. Congress determination to convince Muslims to return to the fold underlies the UPA's silence on the Afzal execution (septel). Alvi made it clear that Congress needs Muslim support, especially to its government in Kashmir, and ""Kashmiris are calling Afzal Guru a freedom fighter rather than a terrorist or enemy of the Indian state.""

Comment - Congress Must Worry

-----------------------------

16. (C) Nainital served an important purpose for the Congress Party, the UPA, Sonia Gandhi, Manmohan Singh, and even Rahul. These disparate forces emerged from the summer more in sync with each other and more committed to working together to face challenges. The roles of the key players in the Congress hierarchy are also more clearly defined. Congress is also confident that it has a strong hold on power in New Delhi and will serve out a full five year term. Despite this, Congress must be careful lest it fall into the trap of over-confidence. Future challenges remain. Congress no longer has the deep national roots that it once did, nor the committed ""vote banks"" that once made it master of the Hindi belt. In the Hindi heartland state of Uttar Pradesh, Congress is elated that it is set to beat out the BJP and assume the position of the state's number three party. It is shameful that it must play second fiddle to two parochial, and highly corrupt regional parties. Sonia and Rahul's political fortunes will not be secure until they have re-established Congress dominance in UP and other Hindi belt states currently dominated by regional parties, for it is in the Hindi heartland that political fortunes are made and broken. The UPA mandate will expire in 2009 and it must then go to the polls, this gives Congress a window of opportunity to establish its appeal at the grass roots.

17. (C) Euphoria surrounding the Nainital meeting has dissipated since late-September, with the delay of the US-India Civil Nuclear Accord a key factor. Our contacts have registered concerns regarding the failure of the Civil Nuclear Accord legislation to clear the US Congress. Congress contacts have implied, however, that the party is willing to wait and give the USG time to get the Agreement through, but failure to pass it would reflect badly on the UPA, the Congress Party and PM Singh, who has become personally identified with the measure.

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

PYATT