Some (Happy) 2G Notes

Todays biggest controversy can produce positive economic and political outcomes tomorrow 2 G, 2G, 2G and we are all to borrow from an ad on 3G services bijiasking ourselves how much worse it can get. The smart answer, of course, is no one really knows. But is it entirely stupid to wonder whether, irrespective of how it plays out, the 2G controversy has produced some positives? The main worry related to the 2G controversy is that it is creating instabilities. But instability by itself is not a negative in a political economic context. There can be positive instabilities. 2G has produced some, and its not an unimpressive list. Lets start with the Congress. The now-famous 2G note has been widely seen as having brought to public domain some dissonances in the partys and the governments top-rung leadership. Assume this is true and look at it in another way: the question of Congress leadership is now possibly more open than anytime recently. Manmohan Singh is being critiqued, Rahul Gandhi, pundits say, is not willing or ready, other big guns dormant ambitions may have been gently rekindled. Altogether, this doesnt or wontlook pretty. But politics doesnt need to look pretty. The Congress may well benefit from instability at the top if that produces some sort of leadership test: who can best lead the government into the next election. 2G has also strengthened the competitive characteristics of the leaders market in the BJP. The BJP thinks the Congress is in trouble over 2G. Which BJP leader can best exploit the trouble thats a question the Opposition party may have to answer sooner rather than later. The elaborate but unconvincing fudge created by the BJP on the leadership question will be tested most severely by brighter prospects of political advantage. Theres certainly a case to be made that some of the 2Gengendered judicial interventions/innovations need to be carefully assessed. But the fact of these interventions/innovations is a positive. Is the Supreme Court too actively involved, is courtmonitoring of a CBI investigation really desirable, is the trial court too harsh on its bail-or-jail calls these are better questions to ask than those provoked by judicial in-activism. Even the fact that there are legally-informed doubts over the strength of the prosecutions case in 2G proceedings is a good outcome. The 2G case will likely set useful precedents, not just legally, but in terms of official investigative procedure as well, in a country that will almostcertainly witness more highprofile corruption cases. A similar argument, about setting useful markers for future, can be made about the complicated subset of 2G that involves the relationship between government policy and government revenue. The alleged 2G scam is the manner in which the ex-telecom

minister, A Raja, allocated licences. The 2G licence policy, one that did not aim to maximise revenue, should be a separate issue. Many think they are not but they should be. No one minimally informed of the multi-variable nature of governance can argue that getting the maximum price for natural and national resources always ensures the greatest good. It can be, and has been, argued that keeping entry costs in telecom low increases customer base and, by giving government a healthy revenue share, its not fiscally irresponsible either. It is vital that we keep making the distinction between policy and revenue and do not accept that revenue maximisation is the only government goal whenever policy and revenue are on the table. The 2G controversy, especially the legal side of it, may well end up sharpening this debate and bring clarity to the distinction. Future policy decisions on a wide range of sectors may benefit from that. Those sceptical of the above positive instabilities will probably laugh at this one: the 2G controversy has also made the argument for good economic governance stronger. True, that sounds funny when set against loud complaints about what everyone is calling the Centres policy paralysis. But consider this: the Congress, ever since its May 2009 election victory and much before the 2G story became big, seemed to have decided that fiscally-backed social-economic engineering could all but replace supposedly metropolitan, big-ticket policy initiatives. Nothing has shown up the hollowness and the danger of that argument more than the 2G controversy. Heres a government battling a corruption scandal that cant even change the headlines because it has seemingly exhausted its bigticket policy capacity the need for smart economic governance has never been clearer than now. Perhaps, the Congress which has twoand-half years more in government will acknowledge the obviousness of this argument and rediscover that capacity. But even if it doesnt, the case against policy in-activism will just get stronger and stronger. It is impossible to think that no political lessons will be learnt from that. Post-reforms India, neither national party has gone to voters being justly accused of actively throttling growth. UPA-I went to the 2009 elections having fiscally supported growth in a huge way. That fiscal capacity is no longer there. Thats why the policy capacity is so important. Whichever way the Congress responds in the remaining period of its term, 2G would put the policy capacity issue in sharp relief. A May 2009-like argument will be much less tenable. Be biji with 2G its unavoidable. But recognise the possibilities of positive change.

SAUBHIK CHAKRABARTI