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UNCLAS SECTION 01 OF 05 NEW DELHI 002829 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR SCA/INS, DRL 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM PREL PINR KDEM IN
SUBJECT: PUNJAB:  BELLWETHER STATE CAUGHT BETWEEN CONSUMER 
BOOM AND RURAL SLUMP 
 
REF: A. NEW DELHI 6868 
     ¶B. NEW DELHI 2556 
     ¶C. NEW DELHI 2631 
 
¶1.  (SBU)  SUMMARY:  Punjab remains the richest state in 
India with its historically strong agricultural sector, and 
nascent real estate and industrial sectors.  However, there 
are signs of decline in Punjab as other states surge ahead. 
Its long-held claim to highest per capita income in India has 
been ceded to neighboring Harayana.  Moreover, its human 
development indices in education and health are comparable to 
some of the most backward states in the Union.  The ruling 
Shiromani Akali Dal (SAD) - Bharatiya Janata Party (BJP) 
coalition government, under the leadership of Chief Minister 
Parkash Singh Badal, is seen by many observers we spoke to as 
oblivious to issues plaguing the state, including 
unemployment, rampant drug use and inflation.  In the run-up 
to Lok Sabha elections due by May 2009, national issues such 
as the economy and terrorism will be front and center, but 
underlying concerns about the direction Punjab is heading 
will also loom large.  END SUMMARY. 
 
PRE-ELECTION BELLWETHER COVERAGE: PUNJAB 
--- 
 
¶2.  (U)  The coming Lok Sabha elections due by May 2009 will 
represent the world's largest exercise in democracy.  They 
will also pose a monumental organizational challenge for the 
Indian state, which must prepare for about 650 million 
eligible voters.  Ahead of national elections, the Mission's 
POL and ECON sections will take the political and economic 
temperature of key states.  The pre-election bellwether 
coverage will zero-in on local trends in Uttar Pradesh, 
Punjab, Maharashtra, Andhra Pradesh, Tamil Nadu and West 
Bengal.  We hope these reports will give Washington readers 
better insight into:  a) the vast India that lies outside of 
Delhi's Ring Road; b) parties and personalities that shape 
India's political landscape; and c) the economic, security 
and social trends that will influence elections results. 
Such snapshots will give us a better sense of how local 
trends affect national politics and, ultimately, U.S. foreign 
policy goals. 
 
¶3.  (U)  During four days of meetings in Punjab (one of the 
"bellwether" states) from October 13-16, we met with senior 
bureaucrats, journalists, businessmen and human rights 
activists.  We spent time in Chandigarh, Amritsar and in 
rural areas outside of Jalandhar. 
 
SLOW GROWTH DESPITE AN URGE TO SPEND 
--- 
 
¶4.  (U)  A gleaming BMW slowly turns the corner on Madhya 
Marg, the main avenue of Punjab's capitol city Chandigarh. 
The driver, Kanwar Dhillon, has one of the hottest rides in 
town:  a BMW 5 Series worth USD 86,000.  A self-proclaimed 
"car freak," Kanwar is the America-educated son of Congress 
Party MLA Kewal Dhillon.  The state's thriving luxury car 
market underscores one of the many contradictions in Punjab's 
social and economic landscape.  While it remains one of 
India's largest luxury markets, its GDP was six-percent this 
past year, making it one of the slowest growing states in 
India, while the agricultural sector has stagnated at 
two-percent growth for the last five years.  When driving 
from Chandigarh to Amritsar, it seems that that every major 
city features at least one modern shopping center selling 
up-market western brands.  Kanwar believes that Punjabis' 
love for luxury goods is intrinsically linked to their 
consumption-driven culture.  "Punjabis are colorful people. 
We buy more, socialize more and like the finer things in 
life," he remarked.  (NOTE:  Such conspicuous consumption is 
also likely a result of the large amount of remittances that 
go to Punjabi families from relatives working abroad.  End 
 
NEW DELHI 00002829  002 OF 005 
 
 
Note.) 
 
¶5.  (U)  Special Correspondent for The Tribune Ashok Sethi 
shared more critical views.  In his opinion, the booming 
luxury goods market is a clear indication of growing income 
disparities in the state.  Differences between booming urban 
centers and troubled rural areas are also at the center of 
the debate about Punjab's relative decline.  Agriculture has 
long been the basis of Punjab's wealth.  However, the 
agro-business sector remains weak despite the impressive crop 
yields after record-breaking monsoon rains this past year. 
Farmers are over-burdened with bank loans to purchase 
tractors and pay loans owed to landlords, which has led to 
increased rates of suicide across the farm-belt, Sethi noted. 
 
HOW ARE YOU GOING TO KEEP THEM DOWN ON THE FARM? 
--- 
 
¶6.  (SBU)  Congress Party MLA Sukhpal Singh Khaira has seen 
first-hand the "vicious cycle" of debt and under-development 
in Punjab's rural farming communities.  Speaking from his 
ancestral home in Bholath, located one hour north of 
Jalandhar, he noted that farmers are uneducated, unorganized 
and unable to break out of debt.  Under pressure from the 
powerful agricultural sector, the Congress party under the 
leadership of ousted Chief Minister Amarinder Singh had 
promised debt forgiveness to farmers in the run-up to the 
February 2007 state assembly elections.  They lost and the 
current Shiromani Akali Dal (SAD)-Bharatiya Janata Party 
(BJP) coalition government, Kaira indicated, did not pursue 
the Congress initiative.  Chief Minister Parkash Singh Badal 
is "all talk when it comes to real development, and people 
are desperate for help," he charged.  Kaira and his village 
constituents have taken to the streets in protest of alleged 
government negligence of the rural sector.  Just days before 
our meeting, Kaira and 100 supporters staged a sit-in at a 
SAD office and were taken into police custody over-night. 
 
DISAPPOINTING SAD-BJP DEVELOPMENT RECORD 
--- 
 
¶7.  (U)  Not all the news from Punjab is negative.  The 
current coalition government can point with pride at the fact 
that for the sixth consecutive year, Punjab has been ranked 
the "best state" by leading magazine India Today's 2008 State 
of States Survey.  The state boasts the highest per capita 
generation of electricity in India at 2.5 times the national 
average.  Punjab's road, rail, air and transport systems are 
routinely rated the best in India and, as a result, it has 
become an attractive destination for foreign companies 
looking to establish Indian operations (Ref. A).  We saw a 
plethora of major road projects throughout the state - from 
the planned city of Chandigarh, to the industrial town of 
Jalandhar, to the religious and cultural center of Amritsar. 
 
¶8.  (U)  Punjab Information and Public Relations Minister 
Bikram Singh Majithia noted that the state government is 
working to connect Punjab to the rest of the country, and to 
upgrade infrastructure to world-class standards.  There are 
more than 100 domestic and international flights everyday, 
and major airport renovation projects are underway in all 
major cities.  Majiithia, however, admitted that industrial 
development continues to lag, as Punjab is a land-locked 
state that lacks natural resources.  He also pointed out that 
tax concessions in neighboring states, particularly Himachal 
Pradesh and Haryana, have diverted private investment thereby 
hindering the industrial sector's growth. 
 
¶9.  (SBU)  There are other worrisome trends.  According to 
the India Today survey, the state's long-held claim to 
highest per capita income has been ceded to neighboring 
Harayana.  Moreover, it human development indices in 
education and health are comparable to some of the most 
 
NEW DELHI 00002829  003 OF 005 
 
 
backward states in the Union. Vijay Chopra, Managing Editor 
of several local vernacular newspapers, noted that "no 
meaningful projects" have been initiated in the education and 
health sectors under CM Badal's watch.  MLA Kaira lamented 
that the rapid rise of private players in health and 
education has made the government complacent in financing 
public sector institutions.  While the middle and upper class 
Punjabis have benefited from the growth of the private sector 
hospitals throughout Punjab, public hospitals lack basic 
resources, such as beds and sanitary medicals supplies. 
Kaira called on the SAD-BJP government to create incentives 
for attracting quality public sector doctors and nurses, and 
to invest in government health care infrastructure.  In 
reference to education, he indicated that most working class 
children drop out of school at fifteen.  In his opinion, 
rural youth prefer to work rather than pursue higher 
education because of the poor quality of instruction and the 
general lack of resources in public schools. 
 
¶10.  (U)  Chopra added that the basic infrastructural 
framework needs a major overhaul, noting that the Punjab 
national highway in rural areas has not been upgraded since 
the 1970's.  The government has focused on "showy" road 
works, such as overpasses in major cities, and has failed to 
address the infrastructure in small cities and rural areas, 
he said.  We saw this first-hand en route to MLA Kaira's 
village in Bholath.  The main roadway in rural Western Punjab 
remained rough and uneven throughout, and we observed few 
signs of commercial development. 
 
DRUGS, THE NUMBER ONE SOCIAL PROBLEM 
--- 
 
¶11.  (U)  Several contacts raised the issue of rampant drug 
use as the number one social challenge facing the state.  The 
Director General of Punjab Police N.P.S. Aulak mentioned that 
the problem has worsened in the last ten years and affects 
people from all income brackets across the state.  He 
indicated that police forces have stepped up drug enforcement 
in railway stations, airports and along the Pakistan-India 
border.  On October 9, DG Aulak noted that Amritsar Airport 
Police had seized 3.7 kilograms of heroin worth more than USD 
1 million from an elderly couple. 
 
¶12.  (U)  Herkewaljit Singh, Editor of the local vernacular 
newspaper the Daily Ajit, blamed unemployment for rising drug 
abuse.  With a stagnant agricultural sector, and limited 
employment opportunities in private companies, many young 
Punjabis have turned to the drug trade to make a living, he 
added.  Drug use in rural Punjab is on the rise, Singh 
pointed out, where farmers use drugs to "dull the pain" of 
debt and to deal with the isolation of rural life.  In his 
view, the SAD-BJP government has not implemented an effective 
anti-drug campaign.  He contended that the state government 
should dedicate sufficient resources and political support to 
investigate criminal drug links.  In addition, Singh called 
on the SAD-BJP to employ an outreach program to educate the 
public about the harmful social and health effects of drugs. 
 
BADAL FAILS TO DELIVER 
--- 
 
¶13.  (SBU)  Even nonpartisan sources we talked to were 
critical of CM Badal's government as unresponsive to issues 
affecting the everyday lives of Punjabis.  Backed by rural 
castes and the Sikh community in February 2007, the SAD-BJP 
coalition came to power on a populist agenda to lift up those 
left behind in Punjab's boom (Ref. A).  In reality, Badal's 
government has failed to deliver any semblance of meaningful 
development and, according to Vijay Copra and Ashok Sethi, 
Punjabis are worse off now than they were one and one-half 
years ago under the previous Congress-led administration. 
MLA Khaira alleged that the SAD-BJP is trying to enhance its 
 
NEW DELHI 00002829  004 OF 005 
 
 
image by taking credit for development projects, such as 
public school and roadwork projects initiated during the 
previous Congress-led administration. 
 
¶14.  (SBU)  Sources also noted that the coalition government 
faces a leadership crisis.  According to Chopra, CM Badal has 
abdicated authority to his son Sukhir Singh Badal, noting 
that Sukhir regularly serves in an official capacity at 
development project inaugurations and other state events. 
"It's like a plane with no pilot.  Who is in charge, Badal or 
Badal Jr.?" he inquired.  Ashok Sethi suggested that the 
SAD-BJP's poor development record may provide an unexpected 
boost for the Congress Party in upcoming elections. 
 
LOOKING AHEAD TO 2009 ELECTIONS 
--- 
 
¶15.  (U)  Amid the global financial crisis and liquidity 
shortage in the domestic market, economic issues will feature 
prominently in national election next year.  During a meeting 
with local Jalahndar business and community leaders on 
October 14, all 16 representatives agreed that the economy 
would be the priority issue in upcoming elections.  Bawa 
Atamjit Singh, managing director of a local leather tannery 
factory, went into detail about the rise in production costs 
under the Congress Party-led United Progressive Alliance 
(UPA) government and worried that he may be forced to layoff 
employees.  "We want to know what the government is doing to 
bring down prices," Singh demanded.  MLA Khaira in an earlier 
meeting explained that spiraling food and commodity prices 
are a "global problem" that cannot be fixed overnight.  He 
pointed to Congress-led policies such as the national rural 
employment scheme and debt waivers that will help to ease 
pressures on the common man. 
 
¶16.  (U)  Meeting with us days after the 123 Agreement 
signing on October 10, contacts spoke positively about the 
U.S.-India Civil Nuclear Initiative and its long-term 
benefits for the bilateral relationship.  Vijay Chopra noted 
that it was one of the most significant foreign policy 
initiatives in India's history and that it will fundamentally 
change the country's global future.  Business and community 
leaders in Jalahndar were hopeful that nuclear trade would 
help address the local need for alternative energy resources. 
 However, most contacts agreed that the government has not 
reached out to the rural community and explained the 
widespread benefits of Civil Nuclear Cooperation.  In order 
to gain political leverage in time for national elections 
next year, contacts called on the UPA to enlist a 
broad-reaching public relations campaign to educate the local 
community about alternative energy, nuclear power and the 
implications for the local consumer. 
 
¶17.  (SBU)  The emerging terrorist threat, following the 
serial terrorist blasts in Indian regional centers from July 
to September 2008, has emerged as a possible liability for 
the UPA in forthcoming elections.  There has been 
considerable internal debate among Congress Party officials 
and UPA allies on whether to enact stronger terror-fighting 
legislation (Ref. B).  Vijay Chopra alleged that UPA 
"internal fighting" on the issue is to be expected, adding 
that senior leaders will not take a "political risk" to make 
a decision on controversial issue.  The party spokesmen 
release statements "promising everything under the sun" to 
earn political brownie points from strategic vote banks, he 
added. 
 
PUNJABIS CONDEMN COMMUNAL POLITICS 
--- 
 
¶18.  (SBU)  Contacts observed that the Bharatiya Janata Party 
(BJP) will suffer setbacks due to their "communal agenda" 
targeting Christians in Orissa and Karnataka (Ref. C). 
 
NEW DELHI 00002829  005 OF 005 
 
 
Punjab Minister of Cooperatives Captain Kawaljit Singh noted 
that Punjabis have no tolerance for communal violence after 
decades of insurgency (Ref. A).  "When minorities from other 
communities are attacked, it touches a soft nerve in the 
state," he commented.  No contacts expressed concern of 
communal tensions remerging in the Punjab.  Compared to other 
parts of India, Herkewaljit Singh observed that people of 
different religious and migrant labor communities live 
peacefully together.  Punjabis seem more concerned about 
issues that affect their daily lives, such as development, 
economic stability and employment, he said. 
 
COMMENT:  BADAL NEEDS TO KICK IT UP A NOTCH 
--- 
 
¶19.  (SBU)  The SAD-BJP government has portrayed itself as 
the government of the people, but it has yet to convince 
Punjabis that it is responsive to popular desires.  While 
Punjab remains the richest state in the Union, it is losing 
competitive advantage across all sectors.  Agricultural 
reforms are moving at a tortoise pace.  Private industries 
have fled to neighboring states.  While economic progress has 
been reported in some sectors, Punjabis fear that the global 
financial crisis and inflation may cloud investors' 
confidence.  Moreover, the ruling government is seen as 
oblivious to issues that affect Punjabis' daily lives, such 
as unemployment, drug use, health and education.  With just 
over three years remaining in the current state government 
administration, Badal will be hard pressed to meet the 
expectations of the Punjab electorate.  He will have to 
devise an effective outreach strategy to convince local 
Punjabis that SAD-BJP is responsive to local needs or risk 
losing political capital to the rival Congress Party. 
 
COMMENT:  ECONOMY AND TERROR TOP 2009 POLLS 
--- 
 
¶20.  (SBU)  In the run-up to national elections next year, 
the UPA's response to perceived economic instability and the 
resurgent terrorist threat will be closely watched by local 
Punjabis.  To address economic fears, the UPA will seek to 
generate positive buzz by pointing to the historic run of 
economic growth and by projecting India's global future 
following the successful passage of the U.S.-India Civil 
Nuclear Initiative.  In addition, the UPA will have to walk a 
fine line to appear tough on terror while not alienating its 
Muslim constituency.  END COMMENT. 
MULFORD