India's Poor May Derail Opening of Economy

State elections could make or break Premier Rao, whose economic reforms have yet to reach India's impoverished

A STRING of six state elections in India will take a measure of popular support for the country's arduous attempt to open its economy, as well as for Prime Minister P. V. Narasimha Rao.

In three of four state elections last year, Mr. Rao's Congress Party suffered a stinging defeat which, some analysts say, represented voter backlash against the economic reforms that Rao embarked on in 1991. The party even lost in the prime minister's home state of Andhra Pradesh.

``I see this as a crisis for the Rao government,'' says Arun Kumar, an economics professor at New Delhi's Nehru University. ``What [Congress leaders] project as a success is precisely what would be seen as a failure by the majority of the poor.''

Most of India's 400 million poor, out of a population of 850 million, have benefited little from the country's opening to foreign investment and the dismantling of state-owned industries. Inflation has reached double-digit levels, especially in rural areas. ``There is ... a sort of feeling that these reforms are for the rich and there is nothing in it for the poor,'' Mr. Kumar says.

That's a sentiment, critics say, that opposition parties have successfully exploited. N. T. Ramarao, head of the Telugu Desam Party, was swept into power in Andhra Pradesh on promises of subsidized rice and negotiable electricity bills.

``The opposition parties were successful in creating a certain amount of apprehension and fear among the rural voters,'' says Tejendra Khanna, India's commerce secretary.

In a recent speech to businessmen in Calcutta, Rao acknowledged the political risks of his economic reform agenda.

``I have no illusions that this is a politically difficult choice, but like the many countries that have attempted liberalization ... and have performed economic miracles, I am convinced this is also the appropriate approach for us at this juncture.''

The Congress Party has ruled India - with only a few interruptions - since independence in 1947. The party's founder, Jawaharlal Nehru, was architect of India's peculiar brand of socialism. Now, says Subramaniam Swamy, chairman of India's Commission on Labor Standards and International Trade, the party is facing a ``deep identity crisis'' as it attempts to dismantle many of Nehru's socialist policies in favor of free-market reforms. ``[Those policies] were in fact wrongly imposed on the country, and they [the government] don't want to admit that,'' says Mr. Swamy.

In the next round of state elections, voters go to the polls in six states - Maharashtra, Gujarat, Manipur, Arunachal Pradesh, Orissa, and Bihar.

The Congress faces its toughest test in the state of Maharashtra in western India. Traditionally a Congress Party stronghold, the state's capital, Bombay, is also India's economic powerhouse. If it were to fare poorly there, analysts say, its chances of victory in the 1996 national elections would be greatly reduced.

According to a recent poll in which 3,000 Maharashtrian voters were questioned by the New Delhi-based Center for Media Studies, results indicated the Congress Party was likely to only win 65 to 70 of the 288 state assembly seats up for grabs, far fewer than in the past.

Foreign investors will be watching the elections closely. They're worried that political pressures will force the Rao government to slow down the pace of reforms, or abandon them entirely. India has already moved much slower in opening its economy than neighboring China.

In his Calcutta speech, Rao vowed to continue the economic reforms, but with a ``human face.'' He suggested that India's next budget, due to be released next month, will further reduce barriers to foreign investment but, at the same time, bolster the country's economic safety net. Government subsidies for food and electricity for instance, are likely to continue and might even increase.

Meanwhile, Rao faces a challenge from a leading dissident, one of his top critics within the party.

Arjun Singh, widely seen as the party's second in command, resigned last year from Rao's Cabinet, and the popular politician has emerged as a potential challenger to his leadership.

Crisscrossing the country, Mr. Singh has publicly accused the party - and Rao himself - of neglecting the interests of the poor and minorities.

Last month, Rao (who also holds the title of party president) suspended Singh from the party. And on Tuesday, Singh was expelled from the party for ``antiparty activities.'' A disciplinary committee, dominated by Rao loyalists, accused him of committing a serious breach of discipline by spreading ``propaganda'' and trying to harm the party's prestige.

Singh, however, has vowed to continue to speak out. He told reporters after his expulsion, ``It can only be decided by the court of Congressmen and the court of the people.''

Singh - and others - have attacked Rao's leadership style. A stiff public speaker who avoids confrontation, Rao is often accused of delaying important decisions until they erupt into a crisis and for tolerating corruption within his ranks. In a recent poll conducted by the Times of India, the largest number of respondents - 49 percent - rated Rao's performance as ``average.'' Only 33 percent des- cribed him as ``good.''

But Rao, who became prime minister after Rajiv Gandhi's assassination in 1991, has weathered earlier political crises, including a corruption scandal in 1992 that nearly drove him from office.

``I am entering my 75th year, and I do not propose to change my style,'' Rao told the Times recently. ``Let people accept me, if they wish to, as I am.''

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