The UPA and its credibility deficit

Also Read |Anil Padmanabhan’s earlier columns

On Friday, finance minister Pranab Mukherjee wrote to chief ministers asking them to crack down on hoarders who, the UPA says, are causing supply bottlenecks and consequent price spikes. The same day, telecom minister Kapil Sibal launched a broadside against the findings of the Comptroller and Auditor General (CAG) which claim that the government’s telecom policy had cost the exchequer a maximum estimated loss of Rs1.76 trillion.

Both smack of desperation and an attempt to divert attention; and in one instance is a very unconvincing effort to diffuse the political blame on a macroeconomic malaise. Do they really think that people will buy into their arguments? Either the government believes that people are generally gullible or the UPA is just fooling itself. Either way, they seem to have lost the plot.

What the government has forgotten is that, at the moment, it is facing an enormous credibility deficit. After an incredible year in which the UPA in general and the Congress in particular have got embroiled in alleged scams culminating in the revival of the country’s most iconic and mysterious scandal, Bofors, their credibility is in tatters. Even if they are indeed telling the truth, there would be few takers.

Something akin to the famous fable of the shepherd boy who cried “wolf"—twice people rushed to his aid to only discover that the boy was doing what in India we call “time pass"; the third time, when the wolf actually turned up and the boy cried for help, everyone ignored him.

It begets the question, what is the UPA thinking?

The finance minister’s directive to states came a day after official data showed that food inflation, riding on a big spurt in vegetable prices, had spiked to 18.32%. After failing to control double-digit inflation for more than two years and making unfulfilled claims by all key economic managers in government that inflation would be rolled back, it is difficult to buy the argument that hoarders are behind the spike in prices. Excess, and in some instances rotting, foodgrain stocks lying in government godowns at a time when food inflation is in double digits is more than just a contradiction; it reflects failure on the part of the government to effectively manage supplies.

Moreover, hoarding can explain one-off price spikes, not systemic double-digit inflation. Besides, onion, the commodity in question at the moment, is a perishable and requires special conditions to be preserved. The surge in real estate prices has probably blown a hole in the business plan of hoarders; it is more profitable to monetize real estate rather than lease it as a godown for hoarding, which has the associated risk of being booked for a crime.

In the case of telecom, Sibal may have a case. It is not the first time that someone is questioning CAG’s methodology; the agency is suspected of applying calculations in a linear fashion and passing off an opportunity cost as a loss. It is a fact that the potential loss to the exchequer has been exaggerated. As one commentator has already pointed out, this is the mistake of the media, which has conveniently taken the upper limit of the range of potential loss claimed by CAG. But this point should have been highlighted when CAG furnished its findings, not months after being politically beaten up for it.

Worse, deposed telecom minister A. Raja should have a right to feel peeved. If CAG got the arithmetic or the charges wrong, then he can claim that all the angst against him is misplaced. While Sibal has carefully stepped around the problem by saying that there may have been some slip-ups in the spectrum allocation process, the government has only made it easier for its critics, particularly the BJP, to claim that this is an attempted cover-up.

Coincidentally, both efforts came a day after the latest poll of the state of nation by the weekly news magazine India Today showed that people were losing faith in the UPA. According to it, if a general election was held today, the UPA would at best manage 222 seats—down from 256 during a similar poll in August.

The only saving grace is that the personal rating of Prime Minister Manmohan Singh continues to be steady and has in fact recovered after a sharp dip in August. However, perceived inaction may prove to be damaging. Not without reason then that the BJP has of late raised the ante and begun to nibble away at Singh’s squeaky clean personal image by arguing that eventually all responsibility rests with the PM, who heads the cabinet.

The credibility deficit that the UPA is facing is obvious. Unfortunately in politics, more often than not, it is not what you do that is important but what you are perceived to be doing. At the moment the majority perception is that the UPA is doing precious little in tackling either corruption or inflation.

Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at capitalcalculus@livemint.com

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