The term “third front” in Indian politics is often a mischaracterisation as in actually what parties want is simply an “alternative.” Back when (which now feels like ancient history) Nitish Kumar was seen as the great hope of the “secular alliance,” he, and those who supported him, were really seeking to recreate the Mahagathbandhan – a grouping of all non-BJP parties including Congress. This was not by any means a third front, but a coalition of everyone who was not BJP.

If successful, they would have pivoted the political spectrum into the closest thing India has ever had to two-party system like in the US. Rather than two parties, it would have been two groupings of political outfits – BJP/NDA versus Nitish Kumar/UPA and just about everyone else who is not BJP – representing the right and left of the political divide. This was not a third front, but instead just the coalescing of the opposition.

The New Face of Opposition

Now that Kumar is back with the BJP, Mamata Banerjee is picking up the pieces and trying to project herself as the new face of this grouping. She too is using the term third front to project an underdog image of a rag-tag coalition of parties simply trying rise up against the oppressive mainstream parties. But make no mistake, like the past, this is not a third front, particularly since she wants Congress to be a part of it. As long as Congress is involved, its simply a joining of the opposition and not a grouping of downtrodden upstart parties seeking to offer a third version, which is not aligned with either BJP or Congress.

But beyond semantics, unlike Kumar, Banerjee seems to have a much better chance of conjoining the opposition parties since she has no alternative option. Like Kumar, Banerjee has greater ambitions, wants a national stage, but runs a party that can never break out of its regional foothold. Yet, while Kumar always had the option of re-aligning with BJP, Banerjee obviously cannot. Accordingly, she has no choice but to lead an effort to unite the opposition.

The critical question is if Congress joins, what will be her role? It is hard to see a united opposition with Congress projecting Banerjee, and not Rahul Gandhi as the prime ministerial candidate. She may do the heavy lifting but will have to settle for the runner-up consolidation prize of being #2 to Gandhi and accept a senior cabinet position.

And this will make things very interesting.

A Gandhi-Banerjee duo heading the thought, vision, and policy apparatus of a united opposition will likely prompt it even further to the left of economic policy relative to where Congress is presently. Let me explain why.

Banerjee has likely not forgotten that shortly after leading the farmer agitation against the Tata’s Singur plant she became chief minister – a reward for her populist uprising perhaps?

Couple this with the fact that perhaps the only time Gandhi successfully attacked Modi was during his famous “suit-boot Sarkar” moment during the land reform discussion – a tag-line that remains to this day. No other attack, comment, or critique has had the same effect since then. With that experience in mind, like Banerjee, Gandhi likely sees success by positioning himself as anti-business, since this is what he paints Modi as.

What Happens to Economic Reforms?

Accordingly, at a minimum, we can safely say Gandhi-Banerjee will not support anything that resembles land reform. Both have found made a name for them selves in opposing anything that simplifies the process of acquiring land for corporations.

But perhaps more disturbing, based on the lessons they have learned, a united opposition with both at the helm will likely take a decidedly leftist and borderline socialist bent. One that prioritises populist policies for farmers over reforms since they will be seen as helping corporate elites. Silly reasoning, and bad for policy, but this is how politics works.

This in turn widens the potential tail risks in 2019.

Even if what I wrote above does not materialise, investors will likely perceive the Gandhi-Banerjee alliance as unfriendly to business. Accordingly, investors will begin to price into the markets either a very pro-business, or anti-business government coming to power. The middle road will not be seen as an option given the stark contrast between the two sides.

If the actual results differ from what is priced in as an electoral outcome, we can in turn expect a market correction to the other side as market re-price risk based on the actual election results. This essentially heightens the prospects of volatility during and around the election season, at least more so than anything in recent memory.

Thus while it is still quiet early, Banerjee’s foray into forming the third front … err, united opposition, needs to be closely monitored with respect to how she molds the alliance’s economic vision. If the united opposition under her influence decides to fight Modi on economics, and positions itself even further to the left than where it otherwise stands, markets may be in store an interesting period in the near future.

Shailesh Kumar is director, South Asia at Washington-based Eurasia Group and analyses political and economic risks and developments in India, Pakistan, Sri Lanka and Bangladesh.

First Published:May 7, 2018 6:56 AM IST