It's time to get down to business

BY Siddharth Varadarajan

Manmohan Singh's second term has seen huge scams but also action against crony capitalism of a kind India has never experienced.


Anyone trying to predict the outcome of our polity's life and death struggle with crony capitalism will have to make sense of two contradictory sets of images.

On the one hand is the obfuscation and prevarication that senior Ministers have served up when confronted with the reality of the 2G spectrum scam and other unprecedented instances of corporate and political robbery. The most recent display of this was by Prime Minister Manmohan Singh himself, who needlessly played down the scale and significance of the revenue loss that the 2G scam had caused. But, on the other, are the pace and scope of the current investigation, which has also been unrivalled by anything India has witnessed so far. The same Prime Minister whose silence and ambivalence on 2G was seen by the Opposition and the public at large as weakness and even complicity has pushed the Central Bureau of Investigation into summoning and questioning top industrialists like Anil Ambani, raiding Kalaingar TV, the business arm of a key political ally, the DMK, and sending A. Raja, who was Telecom Minister till some time ago, to the unwholesome confines of Tihar Jail.

These are extraordinary developments by any yardstick and government managers have let it be known that there is further excitement in the offing. In the days and weeks ahead, more iconic businessmen are likely to be questioned for their involvement in the spectrum allocation scam. Nor will Shahid Balva be the only high net worth individual to be packed off to judicial remand.

When the leaked Radia tapes exposed a small part of the inner workings of the India establishment, our crony capitalists banded together to plead privacy and complain loudly about a “witch hunt.” Top corporate figures and even some politicians spoke about the danger of India becoming a “banana republic” and issued dark warnings in serial interviews about how the investment climate in the country was being adversely affected by the absurd suggestion that respectable businessmen might actually be involved in scams. The purpose of that fully scripted campaign was to ensure that the media, the investigating agencies and the courts all back off. Fortunately for our body politic, that has not happened. Public disaffection is so high that none of the estates of our system can afford to be seen as slackening. And that includes the executive too, notwithstanding the ‘zero loss' logic it foolishly put out. In his testimony to the Public Accounts Committee of Parliament, the CBI director was at pains to distance himself from that arithmetic of denial. Though the agency was painfully slow in getting off the block, nobody can really fault its current approach. And the credit for that must be shared equally by the media, the courts but also, ironically, Dr. Singh.

Yes, the Supreme Court is monitoring the functioning of the CBI but there are scores of cases where similar monitoring has produced nothing even remotely so dramatic. The Mulayam Singh disproportionate assets case, for one. When you are in government service, individual acts of bravery without the requisite air cover can be risky. As the police officers who raided the offices of Reliance Industries in New Delhi 13 years ago when Atal Bihari Vajpayee was Prime Minister discovered, taking on the biggest captains of industry is not exactly a career advancing move. If today, the younger Ambani is answering questions about his role in Swan Telecom, there should be no doubt in anyone's mind that the agency has received pretty direct encouragement from the highest levels of the government.

The question, of course, is whether or not the CBI will persist in its endeavours. Are we being treated to an elaborate dog-and-pony show? Or does the agency's current activism represent a fundamental course correction for a system which has tolerated and thrived on corruption? If yes, does the Prime Minister have the political clout to see things through?

Rent seeking and money making have been fellow travellers of the Indian political system for more than four decades but this is arguably the first time that a Minister has been run out of office and sent to jail as part of a criminal investigation. Never before has the role of big business come under the scanner like this either. When the Bharatiya Janata Party came to power at the Centre in 1998, it promised clean governance. What the country got instead was sweetheart deals in the form of privatisation of hotels and other public sector assets, the petrol pump scam, the coffin scam and other crooked ventures. As the Justice Shivraj Patil report has catalogued, the rot in telecom policy and spectrum allocation also started then. But nothing was ever probed.

The United Progressive Alliance inherited this corrupt system and presided over its unprecedented expansion. Thanks to whistleblowers, upright auditors, a vigilant media and a fair bit of corporate rivalry, however, the truth about 2G, the Commonwealth Games and other money-making enterprises has slowly come trickling out. There are, of course, scores of other fishy deals that need probing too, especially those involving land grants and mining concessions.

What explains the schizophrenic attitude of the United Progressive Alliance government towards the 2G scam? Why does the Prime Minister peddle the fiction that companies like Swan or Unitech did not resell their spectrum (for a profit) but only expanded their equity base, when the sale of equity for a company which has no assets other than spectrum amounts to the same thing? Why does he persist in comparing the loot of public money via the sale of cheap spectrum to the cost of providing food subsidies for the poor — even as the CBI is pounding on the doors of the companies that benefited from the 2G allocation?

As an economist and a man of unquestionable integrity, Dr. Singh knew full well the revenue consequences of forgoing an auction for the allocation of 2G spectrum and recorded his unhappiness with the decision. Even if he is right in saying that he could not have been expected to get into the minutiae of decisions in all Ministries, this can at best explain why he allowed the January 2008 spectrum allocation to take place. What it does not explain is the delay of 20 months in the registration of the first FIR by the CBI. In the intervening period, there was ample material in the press for the Prime Minister to realise something wrong had happened. His argument that the compulsions of coalition came in the way doesn't cut much ice. For one, the DMK, with which the Congress has an alliance in the Tamil Nadu Assembly, would have been bound by the same compulsions and would have been hard placed to rock the boat at the national level. For another, why wasn't safeguarding the public exchequer considered as good a reason for putting the fate of the government on the line as the Indo-U.S. nuclear deal? Finally, ‘coalition dharma' cannot explain the persistence of Congress politicians with questionable credentials in the Union Cabinet, men such as Vilasrao Deshmukh, for example, against whom the Supreme Court has passed embarrassing strictures.

If the Prime Minister were anyone other than Dr. Singh, one might be justified in treating his belated intervention in the 2G matter as an indication of his own involvement. In reality, the delay was the product of both his individual political weakness and his party's failure to understand the political implications of the scam. Today, it is obvious that vigorously pursuing the case is in the best interest of the government, the ruling party and the coalition. Such is the level of public disenchantment that if the Congress fails to punish the officials, politicians and businessmen involved, it will take a beating at the next elections. But there is also a wider, systemic opportunity the 2G investigation provides for the Indian polity. Capitalism needs rules. In mature capitalist economies, those rules are designed to allow businessmen to make “normal” profit and to use (or loot) the resources of the state as a collective. The growth of monopoly power, and thus supernormal profit, is also a “natural” part of the process of accumulation. When individual corporate houses attempt a short-cut, however, they invariably corrupt the wider political edifice. Corrupt politicians come and go. But unless the crony capitalists who use them are punished, Indian democracy will continue to corrode.