The stock markets in general don?t like political uncertainty. The Indian markets, however, have quite successfully absorbed the shocks delivered by coalition politics from time to time. Remember how the markets had tanked by over 13% in one single day when the Left parties decided to support UPA-1 after the general elections in 2004. When the nation was gripped by coalition politics of the worst kind following VP Singh?s prime ministership, the Sensex was around 1,000. We have had a series of unstable coalitions since then and yet the markets have moved on. In 20 years since the start of the fragmented coalition era, the Sensex has gone up roughly 20 times. Indeed, this shows a certain deep resilience of the markets against the vagaries of coalition politics. Of course, this also reflects how the overall economy, based on strong fundamentals, takes politics in its stride.
However, it is equally true that markets don?t like political uncertainty, for it impacts the investment climate in the short to medium term. The current political climate in the country is clearly one that could rattle the markets in the near future. None other than the home secretary GK Pillai has said on record to WSJ that Indian industrialists were spooked by the Niira Radia tapes and were calling him to find out whether businessmen in general were being subjected to telephone tapping. Pillai also told WSJ that the real 2G telecom scam material lay in the tapes not yet released to the media so far.
So the 2G scam, it would appear, has acquired a life of its own. It now has the potential to create serious disruptions in both the polity and the economy in the medium term. Last week, a global energy major looking at investing in oil exploration was seriously inquiring about the impact of the 2G scam on India?s politics.
In some ways, the 2G scam has come to represent an inflexion point that should help resolve many issues facing India?s political economy. The ongoing political churn could be used positively to effect institutional reforms in the way scarce resources such as land, metal ores, energy and spectrum are allocated in an equitable and transparent manner. Indeed, if this is the outcome of the current political churn, it might be worth it.
However, in the medium term the polity appears to be bracing itself for a major upheaval. Last fortnight, The Financial Express had conducted a survey of the urban middle class across four cities and found that more than 80% of the people surveyed believed the 2G and CWG scams together have the potential to become another Bofors for the Congress. The Opposition and some of the Congress?s own allies have sensed this and, therefore, UPA?s centre of gravity is quite shaky at the moment.
Though the Indian voter is inured to a certain level of corruption in society, every 10 to 15 years he wakes up to make corruption a core issue during the elections. It happened in the mid-1970s, with the JP movement creating a central platform for the Opposition parties to come together against Indira Gandhi.
Later, it happened in the late 1980s, with the voters rallying around VP Singh over Bofors. In the mid-1990s, too, a spate of serious corruption charges were brought against the then Prime Minister PV Narasimha Rao. Manmohan Singh, as finance minister then, survived a Joint Parliamentary Committee (JPC) probe into the Harshad Mehta scam. Of course, no one ever questioned Manmohan Singh?s integrity then.
Though no one questions Manmohan Singh?s integrity even today, the one big difference is that he is the Prime Minister and some Cabinet ministers around him are suspected to be involved in one scam or the other.
The Opposition, which was in total disarray until a few months ago, seems to have smelt a Bofors-like situation out of the 2G scam. One can sense that the UPA allies like Mamata Banerjee and NCP are also deeply uncomfortable about the political fallout of the telecom scam. Mamata Banerjee has to go to elections in West Bengal next year and would, therefore, want to distance herself from the 2G scam. No wonder she is also supporting the Opposition demand for a JPC probe into the telecom scam.
The Congress is steadfastly refusing to concede a JPC probe, which could easily drag the Prime Minister?s Office (PMO) into the messy affair. Some of the anxiety on the Congress?s part is manifested in the way the new telecom minister Kapil Sibal is aggressively asserting in media interviews that the PMO has nothing to do with the way
A Raja allocated spectrum to various parties in an arbitrary manner. Raja had earlier been claiming that he had kept the PMO in the loop all the time.
Given Manmohan Singh?s impeccable integrity, the Opposition has refrained from attacking him personally, but it is clearly trying to drag the PMO into the entire affair.
So, the Opposition is playing its cards very carefully. While the 2G scam has the potential of Bofors, the Opposition is yet to throw up a leader who could become a rallying point, like VP Singh did in 1987. The search for that one rallying point seems to be on. As the Chinese say, we are living in interesting times.
?mk.venu@expressindia.com
