Scam Central (Update)

The measure of a good magazine article used to be whether it's still valuable after a month. With the web, maybe that's cut down to a week. But see what you think of my late link to the weekend's cover story from India Today (India's Time to Outlook magazine's Newsweek). There have been a host of articles explaing the nuts and bolts of the 2G spectrum scam, drawing lines between the various corporate players and their alleged front companies. But this is one of the best theories I've seen about how the leaked conversations of lobbyist Niira Radia came to such importance.

(From left: P. Chidambaram, Manmohan Singh and Pranab Mukherjee – from India Today)

Here's an excerpt:

Ambition is never far away from Delhi's crises. This one has been building for some time. One starting point was the statement made by [prime minister] Manmohan [Singh] at his press conference in May 2010 that he would vacate his chair the day [Congress party scion] Rahul Gandhi wanted it. This opened up room for ambition since Rahul seemed either unable or unwilling to occupy the space being vacated by the prime minister. A series of political mishaps, most notably corruption during the Commonwealth Games and release of the Radia tapes, compounded public disenchantment, already severe because of inflation. Mukherjee, the evident No. 2, indicated to INDIA TODAY that this would be his last phase in office.

Opportunity seemed to beckon for leaders within the age group of [current Home Minister P.] Chidambaram and [senior Congress leader] Digvijaya Singh, and they began to position themselves. Chidambaram built upon his intellectual skills and administrative ability. Digvijaya became champion of the 'left' with his pro-poor, pro-minority rhetoric. Such position-play turned toxic when the Radia tapes were revealed. There were two serious implications. One was obvious: the damage to the [Congresss Party ally in Tamil Nadu, the] DMK. The second was less evident. Chidambaram was finance minister at the time when the 2G spectrum was allotted, and therefore, ex-officio, responsible for the pricing decision. Had the tapes been leaked to damage him at a crucial moment in his career?

This is the question that has made the leak of the tapes nearly as important as the content of the tapes. Manmohan's promise of a major reshuffle frayed nerves further. Instead of walking quietly into the sunset, the prime minister was displaying a quiet inner steel.

The prime casualty of the rift and drift is telecom. Afraid of taint, banks are shying away from lending to the sector.

The stakes are high. As this volatile chess-cum-snakes-and-ladders game continues, governance has taken a hit. It is spilling over into the private sector whose entrepreneurial energies have been driving growth in spite of the government. The prime casualty of the rift and drift is the telecom sector. The Economic Survey for 2010-11 said that telecom, a crucial service sector industry, performed "exceedingly well". That may not be the case in 2011-12. The CBI is probing 63 top executives from almost all the leading telecom companies in the 2G scam. Some of them are corporate icons. The taint of scandal surrounding telecom has prompted banks and financial institutions to keep a safe distance. At least some telecom companies are beginning to suffer from the absence of easy and cheap liquidity from lenders. That bodes poorly for future investments in this key sector.

The impact of a drift in governance is not restricted to just telecom. India Inc, the driving force of the country's impressive growth rate, is deeply concerned. Five days before the start of the World Economic Forum in Davos on January 26, 14 eminent persons, led by Keshub Mahindra and including leading lights of Indian Inc like Azim Premji, Jamshyd Godrej, Deepak Parekh and N. Vaghul, wrote an open letter to the prime minister, bringing to his notice "widespread governance deficit in almost every sphere of national activity covering government, business and institutions". The letter went on to say that "the biggest issue corroding the fabric of our nation is corruption".