This reading is based on the desperate struggle for support that UPA-II has gone through, looking for saviours all around and getting snubbed in the process, which darkens the prospect of survival for its full term till mid-2014. Even if it scrapes through on FDI issue, none of the obliging parties outside are won over on FDI, and this would colour their approach to other pending controversial legislative and other reform measures on UPA’s agenda.

Meanwhile, regional parties are preparing for the mighty electoral battle ahead, convinced that neither the Congress nor the BJP, both dwarfed in strength, would be able to cobble together a winning alliance. That does not necessarily imply that a Third Front of non-Congress, non-BJP parties would automatically emerge to take over at the Centre.

Nevertheless, regional parties, notably, the Samajwadi Party of Mr Mulayam Singh, TMC, the Dravidian rivals, ruling AIADMK and DMK will be strong contenders for capturing the maximum number of Lok Sabha seats in their respective states. Ms. Mamata Banerjee, after some political misadventures and a dismal record of governance in West Bengal as Chief Minister, would still hope to galvanise TMC for a strong assertion in the next Lok Sabha.

The Left will remain a unique element with its traditional influence in national affairs, with or without participation in any issue-based alliance. While the BJP is caught in internal strife and squabbles, with a section of its leadership promoting a party stalwart, Gujarat Chief Minister Mr Narendra Modi, as a candidate for Prime Ministership, Mr Mulayam Singh Yadav has also declared himself as a leading contingency choice for the highest office claiming his secular credentials.

The Congress-led UPA-II itself has begun sending out strong signals of its readiness to enter the fray at any time by announcing voter baits, such as the cash transfer scheme directly to the “poor”, which the Finance Minister Mr Chidambaram sees as a “game-changer” as well as a “magic” which would secure the party’s endorsement by the electorate. Undaunted by its latent deficiencies, including non-receipt of cash in lieu of subsidy by the targeted beneficiaries, as revealed in pilot experiments in states like Rajasthan, the scheme is to be rolled out in 51 districts in the country on January 1, 2013.

However, the timing of Government announcement on the eve of Gujarat polls had led to the Election Commission seeking an explanation on this from the Cabinet Secretary while the implementation of the Aadhaar programme, the basis for identification of beneficiaries, itself has also been questioned in a PIL petition in the apex court, contending it had not had legislative approval with the National Identification Authority of India bill still pending before the Rajya Sabha.

Government has told the Election Commission that the cash transfer scheme is not something new and had been announced in the Finance Minister’s budget speech in March last. A sudden sense of urgency, however, seems to have gripped the Government to push through with a scheme holding attraction for at least some segments of the poor, to begin with, but in effect would help Government to reduce its welfare/subsidy expenditure burden, to some extent. This should gladden the Finance Minister in his all-absorbing exercise of fiscal consolidation.

Meanwhile, in the face of opposition from BJP-ruled states, the Prime Minister’s office has directed all Ministries to ensure speedy and trouble-free rollout of the direct cash transfer scheme after ensuring digitisation of the beneficiary database at the state and district levels. With scores of social welfare schemes, Government expects direct cash transfer would help in prevention of leakages and other malpractices. While this may be true for scholarships, pensions or rural employment guarantee scheme, it cannot easily be extended for basic commodities like food and fuel, which account for the bulk of subsidy expenditure.

This involves problems of supply of basic articles in required quantities for the beneficiary households and with Government having no control over double-digit food prices, which it notoriously demonstrated with inflation at record highs for three years running, the utility or the real benefit of cash transfer for the ’aam aadmi’ in a vast country like India would appear to be severely limited. There are other populist plans like ‘right to land’ for the landless and introduction of social security with increases in grants under housing and other welfare schemes, all being worked on in the context of the forthcoming elections.

UPA-II, after an initial burst of “boldness” with a diesel price hike and FDI reforms, intended to give itself some credibility after the “policy paralysis”, and generate positive sentiment for business and investors, seems to be on retreat in some areas, especially further cutting down on oil subsides, and may likely raise the threshold for subsidised LPG cylinders from six to nine under pressures from both within the party and outside. Major subsidies will not be touched for some time to come.

In the four months since UPA-II came up with measures to revive the economy and reforms designed to attract foreign direct investment, sentiment apart, there have been few positive gains on the economic scene. Government’s policy measures are overly focussed on attracting capital flows from abroad which are also partly dependant on global economic conditions rather than toning up the domestic economy by expeditious moves on infrastructure, like power and coal projects, and promoting private investments in other productive ventures by speeding up regulatory and other clearances.

Growth slipped to 5.3 per cent in the second quarter and the first half of fiscal 2013 was marked by decline in manufacture, rising trade and current deficit and a high level of fiscal deficit. The Finance Minister’s revised fiscal deficit target of 5.3 per cent of GDP under the road map of fiscal consolidation he unveiled recently would be significantly exceeded from all indications including official, and would be a drag for monetary easing, amid hopes of a rate cut in the mid-quarterly policy review of RBI on December16.

The foreign rating agencies’ perceptions are again turning negative about India’s economic recovery in the near future, given both the weakening in public finances as well as the political uncertainty in the run-up to 2014 elections. (IPA Service)