Prime Minister Manmohan Singh did betray a sense of helplessness when he spoke at a televised press meeting about the corruption charges engulfing the UPA. While admitting that his government had made mistakes, he was at pains to explain that excessive talk of corruption could undermine the confidence of the people. Too much gloom could create negative sentiment for the economy. Manmohan Singh is a strong believer in John Maynard Keynes?s well known theory that ?animal spirits? among the economic agents play a key role in driving growth and creating prosperity.
The Prime Minister perhaps suspects that the Keynesian ?animal spirits?, which kept India afloat after the global financial meltdown, may be somewhat ebbing for domestic political reasons. Corruption, high inflation, falling stock markets and a perception of governance deficit have combined to heighten the feeling that the overall sentiment could turn negative.
In reality, the UPA still has a big opportunity to retrieve the situation. The Prime Minister did well to assure the nation that the ongoing investigation by the CBI on the spectrum scam monitored by the Supreme Court will not spare anyone, no matter who they are. The Supreme Court-supervised investigation has, indeed, brought back confidence among the people that an impartial probe is under way.
In fact, one was a bit surprised that the Prime Minister did not take credit for the fact that the UPA had dropped A Raja, Ashok Chavan and Suresh Kalmadi from the important positions they were holding. On this score the BJP is on a rather weak ground with the Karnataka chief minister still holding on to his post after being badly exposed in a land scam.
Perhaps Manmohan Singh refrained from attacking the BJP because the Congress is trying to salvage the Budget session of Parliament by getting the Opposition to cooperate. At one level, this makes sense because too much confrontation with the main opposition party will block many key reforms that are badly needed to keep the growth momentum going.
The decision to set up a JPC probe into the spectrum scam is a welcome development as it will create the much-needed thaw between the UPA and the main opposition parties. Pranab Mukherjee can use the Union Budget statement to send out a comprehensive message of political and economic reforms. The Budget should announce a special mechanism and allocation for state funding for elections, which is at the root of much of corruption.
The Congress party should seize this opportunity to implement much-needed systemic reforms that will need the support of the Opposition-ruled states. In fact, the UPA must spend the next three years creating an atmosphere in which some major institutional reforms are implemented in areas like agriculture, land use, mining policy and implementation of goods and services tax (GST), all of which would need the support of state governments.
Finance minister Pranab Mukherjee must institutionalise quarterly meetings with chief ministers to sort out issues with the state governments. The goods and services tax will not only revolutionise the indirect tax system, but it will also act as the biggest anti-inflation reform. GST has the potential to make goods and services cheaper across the board, as it would result in the total incidence of indirect tax falling significantly.
The GST will solve another big problem the Opposition leader LK Advani is talking about these days. The BJP wants black money in India and abroad to be brought back into the system.
Advani is talking about some $500 billion of black money stashed abroad by rich Indians. While every effort must be made to track such funds, the bigger elephant in the room is domestic black money.
In fact, the consensus view seems to be that black money generated by the ever-inflating real estate sector could be much bigger than what Indians have kept abroad. The BJP chief ministers must support GST precisely because it will attack black money by bringing the real estate sector within the GST regime. It could increase the overall tax base by about Rs 10 lakh crore. The BJP, therefore, must prevail upon its chief ministers to rise above partisan politics and support the GST reform.
Finance minister Pranab Mukherjee could use the Union Budget statement to send a strong political message that the Congress wants to do comprehensive reform and is willing to sit with the BJP to discuss all the federal issues that arise in dealing with the state governments on a continuous basis.
The Congress may appear to be under siege today, but things change rapidly in politics. Remember, the Vajpayee-led government was also under a similar cloud for several months when scam after scam exploded on them. The NDA survived those moments and completed its term.
The Congress-led UPA can also survive the current crisis of confidence with some deft political moves that create ground for both political and economic transformation. Congress president Sonia Gandhi has committed to come up with a new legislative framework for state-led funding of elections. Home minister P Chidambaram and other senior Cabinet ministers are said to be working on it. If implemented well, this could be as big as the Right to Information Act, in bringing transparency in our evolving democracy. The idea is not to go back to doing things as before. The ?India rising story? cannot be managed by the same old institutional structures. What we need is change.
mk.venu@expressindia.com