In India the place that matters this week is Gujarat

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There has been a lot of heat and tension in India’s parliament over past week as the government has won grudging and expensive approval for its foreign supermarkets investment policy and there have been noisy scenes over allegations that Wal-Mart has been corruptly lobbying for the cause.

But the most important event that could affect India’s politics for a decade or more is taking place in the state Gujarat where voting began today in the state’s assembly election. When the votes are counted on December 20, India will know whether Narendra Modi, the state’s chief minister, is likely to be the Hindu-nationalist Bharatiya Janata Party’s prime ministerial candidate for the general election due by 2014.

The bigger his expected victory, the more likely it is that this controversial figure, whose reputation is blighted by his widely suspected role in encouraging, or at least allowing, Gujarat’s Hindu-Muslim riots in 2002, will push aside more moderate BJP leaders and opponents and become the potential prime minister. His only real problem in Gujarat is a BJP splinter group that could reduce his vote and prevent him improving on the party’s current 117 seats in the 182-seat assembly.

Modi’s time as chief minister is seen (with the help of a US-based international public relations agency) as having been good for the state’s development, though his focus has been directed more at urban areas and the emerging middle class than at including the rural poor in economic growth. His growing political importance and the economic frole of Gujarat and its inyternational diaspora was recognised in October when Britain resumed official contacts with Modi after a ten-year gap.

It is also beginning to look as if Rahul Gandhi really will emerge as the Congress Party’s prime ministerial candidate, though he will have to show more commitment to public life than he has so far if he is to be taken seriously. He spent one day on the Gujarat hustings - in his usual style of flitting in and out of political events that does his reputation no favours, though his minimalist role suited the Congress Party’s wish to shield him from any blame for Congress’s expected defeat.

A Congress spokesman said three days ago that Rahul would lead the general election campaign and that his mother, Sonia, currently Congress president and leader of the governing UPA coalition, would act as “patron” and “supreme leader”. That seemed to seal Rahul’s role, but it was contradicted a day later by another spokesman who said that Sonia would remain president and that the election campaign would be run jointly. Such is the confusion caused Rahul’s shilly-shallying over what he plans to do with his dynastic inheritance!

Prime Minister Manmohan Singh staked the government’s political future on the foreign investment in supermarkets policy, even though there will only be minimal economic benefits for several years because investments will take some time to emerge and not all states will become involved.

The measure is immediately significant only because it sends a message internationally about the government’s reawakening and determination to try to drive reforms. This has been backed by Sonia and Rahul Gandhi, who have abandoned (or shelved) their ambivalence about reforms and have publicly backed the FDI and other measures. This has enabled the prime minister to move ahead, but the government’s political problems mean that the international reaction has been marginal – the rupee remains stuck around a historic low value of around Rs55 to the US dollar, though the stock market has recovered.

The accusations about Wal-Mart bribing Indian policy makers arose after the American company filed a routine report with the US Senate that it had spent approaching $25m on various lobbying activities including “enhanced market access for investment in India”. That was instantly picked up by Indian politicians and others who blurred the line between legal lobbying and illegal bribing and claimed that Wal-Mart must have broken the law. The government has ordered an independent inquiry would look into the activities of Wal-Mart, which is partnered in India for its wholesale and retail activities with the telecommunications-based Bharti group. Wal-Mart is already being investigated for breaking regulations with a $100m investment in India, and has an internal inquiry in progress in the US looking into possible corrupt dealings in India and elsewhere.

When – as seems quite possible – India has to decide whether it wants the abrasive and controversial Modi to be prime minister, it will have to take account of his reputation as a rare non-corrupt politician.

A longer version of this article is on John Elliott’s Riding the Elephant blog at http://wp.me/pieST-1OS

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