Meeting with Charge and Poloff on May 4, newly-elected Communist Party of India (Marxist) General Secretary Prakash Karat demonstrated that he is a talented and skillful leader who is well-aware of his political importance.

31968 5/4/2005 12:36 05 NEWDELHI 3365 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 03 NEW DELHI 003365

SIPDIS

E.O. 12958: DECL: 05/04/2015 TAGS: PREL, ECON, PGOV, PINR, IN, Indian Domestic Politics

SUBJECT: INDIA'S LEADING COMMUNIST OPENS UP TO THE EMBASSY

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

1. (C) Summary: Meeting with Charge and Poloff on May 4, newly-elected Communist Party of India (Marxist) General Secretary Prakash Karat demonstrated that he is a talented SIPDIS and skillful leader who is well-aware of his political importance. Karat emphasized that the Communists want to play a responsible role in governing India and avoid confrontation and harsh rhetoric, but are determined to oppose policies that clash with their ideology. He welcomed closer ties between the US and India, and Foreign Direct Investment (FDI) on a case-by-case basis, stressing that it must benefit the country. Karat was confident that the CPI(M) would expand its influence, but had no illusions that it could form a ""Third Front"" capable of taking power in New Delhi any time soon. He pledged that his party would continue to work with Congress to ensure that the United Progressive Alliance (UPA) government completes a five year term. Welcoming the chance to open a dialogue with the USG and discuss issues face to face, Karat promised to hold more such meetings on a regular basis. End Summary.

The US-India Relationship

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2. (C) Karat opened by stating that while the CPI(M) supports the United Progressive Alliance (UPA) from the outside, it does not determine policy. The party has no problems with stronger economic ties between the US and India, and finds increasing trade, especially in the IT sector, ""promising."" On the whole, he emphasized, his party favors improved bilateral relations, but wants India to maintain its ""independence"" and has ""reservations"" on several issues, noting that the CPI(M) ""objects"" to the proposed US provision of a National Missile Defense (NMD) system to India (sic). The party wants closer ties with Pakistan and does not want to encourage an India-Pakistan arms race.

3. (C) The Charge corrected Karat, replying that the US proposal is only for a limited missile defense system that would be a stabilizing influence. Likewise, the US is interested in supplying combat aircraft to India, as this will meet an existing need, and the prospect for India-US co-production will benefit the Indian economy.

The Economy

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4. (C) Karat welcomed the decision by the Board of Air India to purchase Boeing aircraft, commenting that the CPI(M) ""is not opposed"" to the deal. The party is also not opposed to all foreign direct investment (FDI) in India, but insists that ""the requirements must be prioritized,"" to ensure that they benefit the country through employment creation and technology transfer. One example is retail trade. The CPI(M) is ""apprehensive"" that opening this sector to foreign companies will ""displace labor"" in the small trading sector and put Indian shopkeepers out of business.

5. (C) The party advocates GOI approval of FDI on a case-by-case basis. In telecom, Karat did not see any reason to raise FDI, as India already has private companies in competition with a viable public sector entity and providing good service. Raising the cap to 74 percent as Congress has proposed ""would eradicate Indian companies,"" Karat maintained, and in any case the communication sector should not be completely foreign-owned for security reasons.

6. (C) Karat joked that the CPI(M) has little leverage on these investment issues, as the GOI can make many investment decisions without parliamentary approval. Insurance is an exception, and there the party could use its clout to oppose proposals to increase FDI from 26 to 49 percent. To demonstrate CPI(M) commitment to case-by-case examination of FDI proposals, Karat noted that his party had ""no objection"" to increasing FDI in civil aviation, which benefits the country. The party wants to ensure that the GOI gives preference to ""domestic capital"" over foreign investment in certain areas. ""We want India to build on its strengths, and have no phobia against foreigners, like the swadeshi wing of the BJP,"" he stated.

7. (C) The Charge replied that research has documented that opening China to retail trade benefited the economy, as Chinese suppliers to Walmart, for example, created more jobs than were lost. India would benefit even more, as it has a strong private sector and the expansion of markets would more than make up for job displacement. Likewise, a liberalized banking sector would introduce long-term banking methods that don't currently exist in India and provide financing for much-needed infrastructure projects, the Charge stressed.

Domestic Politics

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8. (C) Karat dismissed press reports that the CPI(M) planned to create a ""Third Front"" to supplant the UPA, noting that they never printed the second part of his public statements where he said that Communists should work towards such an alternative in the long term. There have been three such ""experiments"" so far in India, with little success. The CPI(M) is cautious and wants to create a stable coalition, not just an ad hoc alliance. To be successful, there must be a ""common policy plank"" to which all the parties must agree, he stated.

9. (C) Prospective members for such a Third Front include the DMK in Tamil Nadu, the SP in Uttar Pradesh, and the RJD in Bihar. For the present, the Communists plan to work with these potential allies to create a ""policy alternative"" within the UPA. The Left is the UPA's strongest guarantee of stability, he underlined, as the Communists do not want this government to fall and it will not do so unless Congress does a poor job of managing the coalition.

10. (C) Karat told the Charge that the CPI(M) is gaining in strength, particularly in the three ""red forts"" of Tripura, Kerala and West Bengal. He predicted that the CPI(M) would form the next government in Tripura and recapture the Calcutta government in 2006. These upcoming electoral contests will not disrupt the UPA in New Delhi, he insisted, as Congress knows it is weak in both states and cannot attack the Communists there while cooperating with them in the capital. In Kerala, Congress is on its way out, as it is time for a shift, and ""it is our turn to come in."" Congress has split in Kerala, he noted, and lost its ally Mamata Banerjee in West Bengal.

11. (C) In Karat's view, it would be ""a mistake"" for Congress to call early national elections, as it is not getting stronger and is losing support in the North Indian ""Hindi belt."" In his view, Congress will require a full five-year term to rebuild and strengthen its base before calling another poll.

The Vision for India

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12. (C) When asked whether the Communists had a vision for India, Karat replied that they were ""wary of grand visions."" However, the Left parties want to implement land reform throughout the country, which would be nothing less than an ""agrarian revolution."" He asserted that many of India's development problems stem from its failure to enact land reform, leading to ""unequal agrarian relations"" and ""skewed"" rural development. Karat defined land reform as the strict enforcement of land ceilings and the distribution of land to the landless.

13. (C) Karat noted that land reform was the ""strength"" of the CPI(M) in West Bengal, where it increased agricultural production, made the state into India's largest rice producer, and demonstrated that small farms can be productive. He cited Kerala as an example of the progress an Indian state can make when land reform is coupled with investments and inputs, contrasting Kerala's performance with Uttar Pradesh, which has one of ""India's most corrupt bureaucracies,"" and all policies are hampered by the caste factor.

14. (C) The Charge pointed out that developing countries benefit from investment in basic health and primary and secondary education and that USAID has large health programs in India. Karat agreed, noting that the Communists were pushing the GOI to increase spending in both sectors, especially in the rural areas.

15. (C) The Charge hoped that the Embassy and the CPI(M) could maintain regular contact and discuss the issues. Karat agreed and hoped to see more of the Embassy in the future.

Comment

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16. (C) Karat is a skillful political leader who can walk a fine line and draw subtle distinctions in policy. Relatively young, he will be a powerful figure on the Indian political scene for years to come, and could play an increasingly important role in the formation of future Indian governments. While reassuring the USG of friendly intentions and a desire for good US-India relations, Karat made it clear that the Communists would oppose the US on a number of issues that matter to the USG such as some FDI, privatization, missile defense and military to military relations. Karat is aware that the Communists are more influential than ever, and appeared determined to demonstrate that they take their role seriously and would not seek confrontation, while continuing to pursue their policy objectives. Clearly welcoming this chance to open a dialogue with the US, Karat was serious about future meetings and interested in discussing issues as they arise.

BLAKE

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