The Year of Scams

The Year of Scams

By Paranjoy Guha Thakurta | Feb 19, 2011

The problems of the Manmohan Singh government can be summarized in two words: 
corruption and inflation. The biggest strength of the second UPA coalition is the weakness of the Opposition, both on the Right as well as the Left. The incumbent regime hopes that it will be able to neutralize the attacks on it by waiting for the outcome of the state legislative assembly elections in West Bengal, Kerala, Tamil Nadu and Assam.

Thereafter, the Congress and the UPA expect to get a new lease of life (as the Communists are certain to perform poorly in their two bastions in the south and the east). But those in power at present will be guilty of complacency if they believe they can continue to tackle inflation and corruption in the half-hearted manner they have done so far.



The desultory manner in which the authorities have dealt with inflation and corruption has disappointed even the most ardent admirers of Singh. Here is a world-renowned economist whose words are listened to with rapt attention in G-20 meetings where the post-recession problems of the planet are discussed. At home, however, he heads a government that has failed miserably in controlling food prices that directly hit the poor and now even the middle class who are keen to become part of the famous ‘India growth story’.

Despite the fact that foreign institutional investors who have poured in record amounts into the country’s capital markets, the Sensex is yet to cross the 21,000 mark that it touched three years ago in January 2008. This is the situation prevailing in the secondfastest growing economy in the world which was spared the worst ravages of the international recession, the medium-term effects of which are yet to play themselves out.

Within India and outside, there is growing realization that over the last two decades, the gap between the rich and the poor has widened even if one does not subscribe to the popular view that the “rich have become richer and the poor poorer”. What has, in fact, happened is that the rich have become richer at a far faster pace than the speed at which the poor have become “richer”. Even those in government will acknowledge the limitations of focusing only on economic growth that is still far from inclusive, jobcreating and spread unevenly across geographical regions and sectors. In particular, the growth of the country’s agriculture sector remains rather sluggish.

Corporate captains are worried about interest rates hardening. But the Reserve Bank of India has no choice in this regard if it wishes to curb inflationary expectations. Finance Minister Pranab Mukherjee is preparing the proposals for the Union Budget, due for presentation at the end of February. His options too are limited. His biggest challenge is to curb inflation. There is reason to believe that the rate of increase of the wholesale price index and the consumer price indices will decelerate. But the government cannot hope to fool people by claiming that food prices will come down with a slowing down in the inflation rate.

What’s worse for the UPA government is the growing perception that it has not just been unable to curb corruption but actively abetted it. The issue is no longer whether the disgraced former Union Minister for Communications and Information Technology Andimuthu Raja will be punished or not. The bigger question is why the PM chose to turn a blind eye for more than two years to his Cabinet colleague looting the national exchequer by allocating scarce and precious electromagnetic spectrum used by mobile telecommunications companies at rock-bottom prices.

The spectrum scam will not disappear in a hurry. Like the Bofors scandal haunted the Rajiv Gandhi government and paralyzed its functioning between 1987 and 1989 (although nothing was conclusively proved in a court of law), the current government has acted too late in checking not just the spectrum scandal, but also the scandals relating to the way in which the Commonwealth Games were conducted and the allotment of flats in Mumbai’s Adarsh Housing Society.
The government bungles along. Till the next scam.