When Tehelka's exposure of all-pervasive corruption in arms purchases rocked the nation in March, I had expressed the fear in these columns that it would seriously weaken the Vajpayee government's capacity to tackle the economic and political challenges that the country faces. That fear has been borne out beyond my worst nightmares. Evidence of corruption within the government has been seized by the rss to launch a no-holds-barred attack on the prime minister, with the aim of forcing him out of office. Evidence of corruption in the bjp has been used by the Congress to launch a renewed attack on the nda government in the hope of forcing it out of office.
Neither of these endeavours has the least chance of succeeding. Vajpayee will remain PM as he enjoys a towering respect in the country that the bjp cannot dispense with, and because no one else from the party is even remotely as acceptable to the bjp's allies in the nda. By the same token, there is not the least likelihood of the nda falling apart because after a series of election reverses, the Congress is no longer a credible alternative for disgruntled members of the nda to flock to. This has been amply demonstrated by the schism that has developed in the only party that has tried to find its way back to the Congress, the Trinamul Congress.
What Tehelka, and the opportunism of the Congress and the rss, have done is to seriously weaken the government's capacity to govern. The first casualty has been the budget-making process. Finance minister Yashwant Sinha could not pass his much acclaimed budget in March and was forced to ask for a vote on account, because of the Congress' decision to stall all proceedings in Parliament. The second is the government's failure to conclude the privatisation of Balco, and the question mark that consequently hangs over the privatisation of 27 other psus, including Air-India. This has severely damaged the credibility of India's economic reforms in international circles.
A more serious threat is the imminent failure of structural reforms, the so-called second generation of reforms, that Sinha had unveiled in his budget speech. The purpose of these reforms was to reduce the fiscal deficit from the current 5.1-5.3 per cent to 2 per cent over five years, as required by the Fiscal Responsibility Act the government enacted in December. Sinha was relying on four measures to achieve this—lowering interest rates and the consequent reduction in the government's massive debt servicing costs; the drastic curtailment of food procurement and the consequent saving of Rs 5,000 per year on the storage of foodgrains; the deregulation of oil product prices and consequent elimination of subsidies on diesel, kerosene and cooking gas next year, and the deregulation of fertiliser prices to end subsidies over the next five years. Today, only the first of these has been implemented. All the rest are in dire jeopardy.
Faced with a bumper wheat crop, the Punjab government has already announced that it will buy all the wheat that farmers want to sell to it at the recently increased procurement price. Punjab has thus thoughtlessly taken over the policy of propping up foodgrain prices artificially that the Centre has at last given up because it had led to the stockpiling of 45 million tonnes of foodgrains that no one wanted to buy. Punjab, however, is one of several states that does not have enough money to pay the salaries of its civil servants, let alone procure and store wheat and rice.So where will it get the money for the procurement? From the central government, of course. And if Sinha demurs, the Akali Dal can always threaten to walk out of the nda. It knows it will get its way because after the departure of the pmk and the Trinamul Congress, it now needs only one major defection to rob the nda of its majority. What Punjab has done today, Haryana is almost certain to do tomorrow.
What is happening to foodgrains procurement this year is almost certain to happen to the deregulation of petroleum product prices next year. The lobbies in favour of retaining subsidies on diesel and kerosene are so powerful that government after government has shirked this reform for the past 10 years despite the fact that it could have reduced its fiscal deficit by a third. Next year, more of the nda's partners will be facing state elections. So it is difficult to see how they will allow Ram Naik and Yashwant Sinha to fulfill its pledge.
The other structural reform that will almost certainly not see the light of day is an amendment of the Industrial Disputes Act that will allow employers to lay off workers without the prior permission of the government. This reform is desperately needed to cure the all-pervasive sickness in industry and in particular small-scale industry, because it will allow employers to sell or close down their plants in an orderly manner, after paying workers their dues. This will release the thousands of crores of rupees that are currently locked up in sick industries for reinvestment and to create new jobs. But with the Congress having decided to withdraw cooperation from the nda in Parliament over economic policy, it too is a non-starter.
The final casualty could be Vajpayee's already much-dented initiatives in Kashmir.
Is this decline of the Centre's power permanent? Is India doomed to misgovernment till it cracks under the weight of its unsolved problems? The elections that have begun even as I write could provide the answer. What matters is not whether the bjp's allies win or lose but whether the bjp's own vote increases. If it does, it will amount to an endorsement of Vajpayee's policies by the electorate. That could give the government the courage to take difficult decisions that it so desperately needs.