May 11 (Bloomberg) -- Indian Prime Minister Manmohan Singh may be wondering why he needs enemies when his biggest ally is Mamata Banerjee.
After ending a generation of communist rule in India’s West Bengal state a year ago, Banerjee has emerged a more strident critic of the federal coalition she’s part of than her Marxist arch-rivals. Singh’s plans to allow foreign investment in supermarkets and airlines fell to Banerjee’s hatchet, while proposed increases in prices of fuels and rail tickets were jettisoned as she protested on behalf of the poor.
Banerjee, whose growing political clout drew a visit from U.S. Secretary of State Hillary Clinton in Kolkata this week, exemplifies the rise of intractable allies in India’s ruling alliance as they shape decisions to advance provincial ambitions. Singh’s Congress party, damaged by corruption allegations and policy reversals, has two years until parliamentary elections in 2014 to rein them in.
“She has taken a wrecking ball to the government’s agenda over the last year and her confidence is growing the more she gets her own way,” said Samir Arora, founder of Singapore-based hedge fund Helios Capital Management Pte, which focuses its investments on India. “Mamata is the single biggest obstacle to reforms in India today.”
A single act of defiance by Banerjee and her All India Trinamool Congress party over higher fuel costs stymied efforts to reduce $8 billion of subsidies that contribute to the widest budget deficit among major emerging economies. India’s gross domestic product expanded 6.9 percent in the year to March 31, the slowest pace since 2009, according to government estimates.
“Banerjee has thrown her weight around and has been able to exploit a very weak government,” said Mohan Guruswamy, chairman of the Centre for Policy Alternatives in New Delhi and a former Finance Ministry adviser. “She’s populist and latches on to issues where other regional parties will give her their backing.” That supplies Banerjee with the power to sway policy despite her party having just 19 of the 545 seats in parliament’s lower house, Guruswamy said.
B.G. Verghese, a former aide to ex-Prime Minister Indira Gandhi, said Singh is partly to blame for the state of his fractious ruling alliance.
The rise of regional leaders “is something that is here to stay and the national parties have to get used to it,” Verghese, a New Delhi-based commentator with the Centre for Policy Research, said by phone May 3. “Congress has performed poorly at winning over its partners.”
Singh’s second-largest ally -- the Dravida Munnetra Kazhagam, from the southern state of Tamil Nadu -- persuaded the government to back a United Nations resolution against neighbor Sri Lanka in March. Farm Minister Sharad Pawar, who’s also the leader of the Nationalist Congress Party, last month prompted a reversal of a plan to ban cotton exports.
Banerjee’s office didn’t respond to repeated requests for an interview with Bloomberg News.
Born in Kolkata, Banerjee joined politics while at college in the 1970s and was first elected to India’s national parliament for the Congress party in 1984 from West Bengal, after which she helped lead the party’s youth wing.
Banerjee, who claims to be five years younger than her official age of 57, suffered head injuries when members of a communist militia attacked her during a rally in 1990. Vision in her right eye was damaged in a 1996 assault, according to her autobiography.
A part-time painter and poet, Banerjee formed Trinamool in 1997 after resigning from Congress, saying the party was too close to the Marxists. She aligned Trinamool, whose name means grassroots, with the then ruling Bharatiya Janata Party from 1999 before switching to join Singh’s coalition elected five years later.
Riding to power last year on a wave of anger over the failure of the communist alliance to create jobs in West Bengal -- Trinamool won 184 seats in the 294-member assembly, six times the 30 it secured in 2006 -- Banerjee has won plaudits for ending a culture of labor disputes that took hold under the communists.
Shutdowns and ideological confrontations curbed development in a state that, according to a University of Oxford study in 2010, accounts for the country’s third-largest number of people living in poverty.
“She has sent a signal that she is not for strikes and that’s a very positive move,” said Abhirup Sarkar, an economics professor at the Indian Statistical Institute in Kolkata. “Businesses used to be afraid to come to the state. Not anymore.”
Her achievements haven’t been enough to win over some investors.
Infosys Ltd., India’s No. 2 software exporter, has suspended plans for a 5 billion rupee ($94 million) campus in Kolkata, it said in an e-mail without elaborating. Banerjee, who last year opposed setting up special economic zones, refused to allow Jai Balaji Industries Ltd. to acquire more land for a steel plant, the Times of India reported Feb. 16.
“While the government has taken some positive steps such as ensuring power supply, the to-do list is longer,” P. Roy, director general of the Bengal Chamber of Commerce and Industry, said in an interview.
While Banerjee and her fellow chief ministers fight their corners, Standard & Poor’s on April 25 warned that India is at risk of losing its investment-grade rating as political stalemate hampers policy making. A downgrade to junk may spark a sell-off in the nation’s stocks and bonds by foreign investors, according to D.H. Pai Panandiker, president of RPG Foundation, a New Delhi-based economic policy group. “It’s a very scary thought,” he said.
The rupee has dropped 16.3 percent in the past year making it the worst performing of 11 Asian currencies tracked by Bloomberg. The rupee, which fell to a record low of 54.3050 on Dec. 15, gained 0.8 percent to 53.42 in Mumbai yesterday, according to data compiled by Bloomberg. The benchmark Sensex stock index has declined 11 percent from the Feb. 21 high.
Banerjee’s meeting with Clinton, in India for security and investment talks with Singh’s government, took place 48 hours after she carried out her latest mini-rebellion: helping derail the government’s plans for a national counter-terrorism center, arguing its powers would usurp those of state police forces.
Clad in her trademark white cotton sari, Banerjee and Trinamool Congress formed the government in West Bengal last May pledging poriborton, or change in Bengali, after decades of communist rule.
‘Slave or Enemy’
Instead, Banerjee, known to her supporters as didi, or elder sister, and who still lives in a small house in the narrow lanes of Kolkata, has spent the last 12 months erasing memories of the Marxists and fostering an atmosphere that brooks no dissent, according to Kabir Suman, a Trinamool lawmaker who has turned against the party’s leader.
“She can’t countenance any opposition,” Suman, a musician, said in Kolkata May 3. “You can either be her slave or her enemy. You can’t oppose her.”
Ambikesh Mahapatra, a Kolkata chemistry professor and communist supporter, says he has witnessed that firsthand.
After signing into his e-mail account last month, Mahapatra forwarded an illustration lampooning Banerjee, a spoof on a Bengali film poking fun at her dismissal of a fellow Trinamool lawmaker from his job as rail minister. A week later, the academic was begging for his life as Trinamool supporters assaulted him. He spent most of that night in jail charged with making obscene gestures to a woman and defamation.
“It’s intolerance on part of the government,” Mahapatra said in an interview in Kolkata’s Jadavpur University where he teaches. “I didn’t make the graphic. I didn’t insert comments or distort it. I only forwarded it to my friends just to share a joke.”
Red to Blue
“She’s very strict about discipline,” said Shuvaprasanna Bhattacharya, appointed by Banerjee to a management role at Indian Railways, a network the Trinamool leader ran as rail minister from 2009 to 2011. “People are scared of her only when they do something wrong.”
Buildings and road dividers in Kolkata, previously dotted with red hammer-and-sickle motifs, have been painted sky-blue on Banerjee’s orders. After deadly clashes between her party and communists, Trinamool barred members from mingling with the enemy, state Food Minister Jyotipriya Mallick said April 30 in his freshly-painted ministry building.
Banerjee built her support in 2008 by spearheading a campaign demanding Tata Motors Ltd. abandon a facility to build the Nano small car in Singur, about 90 minutes’ drive outside Kolkata, and return land to farmers she said had been cheated.
“She can read the pulse of the people,” said West Bengal Industry Minister Partha Chatterjee, citing Singur and Nandigram, where Banerjee led protests against a proposal by Indonesia’s Anthoni Salim to build a petrochemical complex. The agitation in Nandigram led to the deaths of 14 people.
“We are not opposed to industrialization but we need a balance,” Chatterjee said, citing approval for JSW Steel Ltd.’s $3 billion project in the state. Banerjee’s government is trying to improve West Bengal’s “work culture,” plagued by sudden strikes, he said in his office in the 18th-century Writers’ Building, the state’s power center.
In the meantime, Banerjee, named in Time magazine’s 2012 list of the world’s 100 most influential people, is demanding Singh’s government reschedule payments on $40 billion of loans, the biggest debt burden among 17 of the country’s largest provinces.
“Even though Banerjee is now in power, she is stuck in her old opposition role, criticizing everything,” Helios Capital’s Arora said. “She’s not willing to negotiate, she has a viewpoint and that’s it.”
To contact the editor responsible for this story: David Merritt at firstname.lastname@example.org