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Oil Report

ANALYSIS-India may see snap poll after nuclear deal end game

NEW DELHI, June 26 (Reuters) - After more than four years of alliance, the Indian government and its communist allies appear closer than ever to a split over a civilian nuclear deal with the United States, which could spark early general elections.

If the split happens -- and many think it is a matter of weeks -- the government will quickly need to find another party to provide it with a parliamentary majority, or face the risk of early elections before scheduled May, 2009 polls.

It is possible India will soon enter months of political uncertainty and electioneering, putting in jeopardy the chances of tough and decisive measures from the government to deal with record inflation, rising rates and signs of a slowing economy.

After years of communists blocking market reforms from financial sector liberalisation to privatisation, Prime Minister Manmohan Singh may have put his foot down over the nuclear deal, determined to leave office with some sort of legacy.

Frustrated from months of delays, Singh knows time is running out for the deal to be approved before President George W. Bush leaves office.

Singh sees the deal giving India access to U.S. nuclear fuel and technology and allowing closer trade and diplomatic ties with Washington. Communists see India becoming a pawn of Washington and have threatened to withdraw support if the pact goes ahead.

“The division between the government and the communists is wider than ever and unlikely to be bridged,” said Pran Chopra, a political analyst.

The pessimism follows Wednesday’s meeting between the two sides. Party leaders left grim-faced after fruitless talks.

“Dead End” was the Times of India headline.

“Countdown Begins For Early Polls” said the Mail Today.

The prime minister is reported to want the government to go ahead with the deal before he heads to a G8 summit in Japan on July 7 and meets Bush, the man whom he shook hands with at the White House in 2005 over the agreement.

Congress leaders are still publicly optimistic.

“We are very hopeful that we can sort things out before long,” said Veerappa Moily, a senior Congress leader.

But few politicians or commentators share his optimism.

A MINORITY GOVERNMENT?

If the communists withdraw support, the ruling coalition led by the Congress party will become a minority government. The president could then ask for a vote in parliament.

The main opposition party, the Hindu nationalist Bharatiya Janata Party (BJP), could also force a confidence vote in parliament. If the government loses, elections would be called. Analysts then expect a poll sometime after October.

“We definitely think there will be an election in December or January,” said Mukhtar Abbas Naqvi, BJP vice-president.

But a snap poll is not inevitable.

An early election would be a blow for Congress and its allies. Inflation is at a 13-year-high. Congress has already lost a string of state elections this year.

“The only party benefiting from early elections would be the BJP,” said Yashwant Deshmukh, head of C-Voter polling agency. “There will be a split between the left and the government. But that does not mean there will be early elections. Both sides would like more time to prepare.”

That is why Congress is looking for support from another group, the regional party Samajwadi Party (SP) led by Mulayam Singh, to try to replace the communists if they leave.

“The two parties are in touch with each other,” said one Congress leader, who asked to remain anonymous.

But shoring up a coalition after the communists leave will be hard. The government may need support of smaller parties as the SP may not have enough seats to guarantee a government majority.

“The government will try to survive. But survival minus the left will very difficult and uncertain,” said political analyst Mahesh Rangarajan.

Ironically, the government could be staking its survival on a nuclear agreement that may never get approved by the Bush administration.

The deal still needs clearances from the International Atomic Energy Agency and 45-nation Nuclear Suppliers Group. Then it would have to go to the U.S. Congress for final approval. Time is running out in a U.S. election year.

“Everything has to happen very, very quickly,” said a senior U.S. official, who asked to remain anonymous. “I won’t kid you -- the clock in the legislative year is very, very short.” (Additional reporting by Bappa Majumdar in New Delhi and Paul Eckert in Washington)

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