In the wake of the 1996 parliamentary elections, on June 1, H. D. Deve Gowda, as India's 12th prime minister, assumed leadership of aminority United Front government, and with "outside" support of theCongress party, the coalition is expected to secure the necessaryparliamentary majority to retain power. The new UF government is inherently weak and is vulnerable to the withdrawal of Congress support, with the prospect of new elections within two years, but the threat of the Hindu nationalist Bharata Janata Party (BJP) will be a major force in sustaining the government in power. Key features of new government will be a redress of the federal balance, with increased power to the states, and an economic policy that, while perhaps taking a more selective approach to foreign investment, remains committed to deregulation and market-based reform.

Election Results: What Happened and Why

With a voter turnout of more than 60% and comparatively little violence, elections were conducted over three days. Despite 14,700 candidates and 522 parties, the choice really turned around three groups or alliances: the Congress party (led by Prime Minister Narasimha Rao), which has governed for 44 of the 49 years since India's independence; (2) the Hindu nationalist BJP and its allies, notably the Shiv Sena, ruling party of Maharashtra (where the financial/industrial center of Bombay is located); and (3) the center-left combination of the National Front (Janata Dal, et al), Left Front (communist parties), and regional parties.

The results for 534 parliamentary seats, announced May 10, were:
BJP 160 + 34 for allies: total 194--BJP: 23.5% of vote (+2.7 from 1991)
Cong 136 + 3 for allies: total 139--Cong: 28.1% of vote (-8.4 from 1991)
NF-LF 111 + 83 for regional parties and Congress dissidents:
total 192--NF-LF: 20.2% of vote (-4.7 from 1991)
NOTE: The decline, in part, reflects a l99l National Front that included regional parties that in 1996 were unaligned.

Various factors account for the Congress loss--and its lowest vote ever:

- atrophy of state party units and grass-roots organization;
-loss of support among Muslims, untouchables, and members of the"backward" castes to other "secular" parties (NF-LF, caste-based and regional parties) and loss of support among upper Hindu castes to the BJP--reflecting erosion of support over the past decade that accelerated under Rao, with new voters disproportionately mobilizing along communal (religious) or caste lines;
- party distention at the center (with expulsions of political rivals) and in a number of states, notably Tamil Nadu, where Rao's decision to align with an increasingly unpopular party (AIADMK) that ruled the state, split the state Congress organization and ensured a rout that cost the party 28 seats;
- corruption, especially the bribery scandal that forced seven member of the Cabinet to resign; and
- failure to effectively get the message of its achievements across and, overall, a lack-luster campaign.

Following parliamentary custom, Indian President Sharma invited the largest party--the BJP--to form a government. BJP leader Atal Bihari Vajpayee, sworn in as Prime Minister on May 15, was given two weeks to prove majority support in parliament. The government sought to project an image of moderation, emphasizing its commitment to economic reform and, to assuage Muslim fears, appointing a Muslim as Foreign Minister. But among its first pronouncents, the BJP government reaffirmed its commitment to the construction of a Hindu temple at Ayodhya, on the site of the Babri mosque destroyed by Hindu militants in 1992; to uniform personal law, ending legal recognition for distinct Muslim law on matters of marriage, divorce, and inheritance; and to a ban on cow-slaughter, a measure that would principally affect Muslims. Clearly, for all attempts to project a moderate image, the BJP was not prepared to abandon its core distinction as the party of Hindu nationalism--and it was this that forged the unity of the "secular" parties in opposition to the BJP. The BJP proved unable to win regional party backing or to split the Congress party, and on his 13th day in office, Vajpayee submitted his resignation before the vote of no-confidence would have brought down the government.

The Congress, second largest party in parliament, declined a bid to form a government and extended its support to a United Front government led by H. D. Deve Gowda, Janata Dal chief minister of the southern state of Karnataka and a "dark horse" to national leadership. Following the elections, the National Front-Left Front combination took the name "United Front" and reorganized as a 13-party alliance, but the UF coalition government also includes regional parties now allied as the Federal Front. The Communist Party-Marxist (CPM), principal party of the Left Front, while supporting the government, declined to participate formally as a coalition member.

Prospects for Stability

On taking office, Prime Minister Deve Gowda declared that India had entered "the era of coalitions," of government that was more genuinely representative of India's diversity than single party rule. This may lead India toward what might be termed an Italian model--with a pattern of shifting coalitions, punctuated by government "crises" and more frequent elections. Indeed, this was evident with the 1989 elections that brought India's first (short-lived) minority coalition government.

The new center-left United Front government is fractious and inherently unstable. Its ideological embrace ranges from free-marketers to unreconstructed communists, but a more serious threat comes from leadership struggle by the contentious personalities who dominate the constituent parties. Gowda's selection represents an uneasy compromise, and strains in the alliance were evident over the selection of cabinet ministers before the government even took office.

The coalition is a minority government dependent on outside support from the Congress party, which at any time could withdraw support and bring the government down--perhaps in a bid to take power in a new coalition or to force fresh elections. (One area of possible trouble might come in a condition for Congress support that the government not pursue former Prime Minister Rao in any corruption cases.) New elections within two years, perhaps earlier, are surely possible, but instability, discrediting both the United Front and the Congress, would almost surely rebound to the benefit of the BJP, and it is the threat of the BJP that will be the greatest force in holding the government together and in sustaining it in power.

Policies of the UF Government: Direction and Implications

Although the Front's "common approach" to policy has yet to be hammered out, Prime Minister Deve Gowda, from a middle agricultural caste and with a degree in civil engineering, told journalists, "I am a peasant, a farmer, and my priorities would be rural development, social welfare and prominence to the agricultural sector." He committed his government to the path of market-based reforms initiated by the government of Narasimha Rao, and he added that foreign investment flows would not be affected by the change in government. Foreign policy, he said, will remain unchanged. What finally emerges in policy will be more clearly evident in the coming weeks--and the best signal will be in the budget submitted to parliament inmid-July.

Center-State Relations

Federalism was central to the NF-LF program, and the new government will surely usher in a decisive turn toward decentralization and greater power of the states. Over the past five years, with economic reform, states have become increasingly important actors as they competed for foreign investment. In l996, regional parties, now organized as the Federal Front, strengthened their position in parliament and, as critical participants in the coalition government, will push for greater federalism. Its impact will be most evident in pursuing economic reform, where states will increasingly assume responsibility for extending and deepening reform.

Economic Policy/Foreign Investment.

The United Front will take as its highest priority the uplift of India's rural masses, but for all the populist rhetoric and programs, only economic growth can bring India out of poverty--and here sustained economic reform and foreign investment are critical. There is now a fundamental consensus in support of market-based reforms--and deregulation was not an issue in the election campaign. But the role of foreign investment is disputed. In the election campaign, both the BJP and the NF-LF staked out roughly similar positions favoring foreign investment, but with restriction to priority areas such as infrastructure (power) and high technology.

Within the NF-LF, there are those, like the BJP's "swadeshi" economic nationalists, who are hostile to foreign investment, but at the state level, governments controlled by these parties, including communist-ruled West Bengal, have supported economic reform and have aggressively pursued foreign investment. As chief minister of Karanataka state, Deve Gowda nurtured a favorable business climate and attracted foreign investments that helped to make the state capital of Bangalore the computer/software center of India.

Prime Minister Deve Gowda's commitment to reform and foreign investment is reflected in his appointment of P. Chidambaram (who as Commerce Minister in Rao's government was one of the architects of economic reform) as Finance Minister. Moreover, the United Front depends on Congress support, with a condition that there be no roll-back of economic reforms.

Although reforms are now deemed "irreversible," the UF government is unlikely to move forward on privatization of public sector firms, "exit policy" that would make it possible to lay-off workers and close money-losing companies, or reform in the financial sector, notably insurance. And selective restrictions on foreign investment, especially in consumer non-durables, should be anticipated as a gesture to economic nationalism. There is risk that such restrictions, as in the case of Enron, could dampen foreign investment interest, but in the long stretch, any government must seek expanded foreign investment. Infrastructural priorities alone make this imperative, but unless India's growth is permitted to languish, the infusion of foreign capital more generally will be a requirement that will shape investment policy.

The benefits of economic liberalization have generally not affected India's poor and rural masses, and, independent of arguments for equity and social justice, it is expedient, both politically and to preempt social unrest, that government address the problem. One area of concern, however, heightened by the UF government's commitment to rural uplift and anti-poverty measures is that populist-driven subsidies, especially for farmers, may be increased--exacerbating budget deficits that are now just under 6%. Unless the government reins in the deficit, with its burden on growth and ever-larger debt-service, India could well return to economic crisis, like that of 1991, which forced Narasimha Rao and Finance Minister Manmoham Singh to launch the reforms that have transformed Indian economic policy.

Robert L. Hardgrave Jr.

University of Texas