The ground reality is that the retail prices of food grains have gone up by 15-20 per cent and prices of almost all commodities have increased due to inflation pressures that have existed for over six months. The additional hike will further increase prices across a broad spectrum.
As the United Progressive Alliance and the combined Opposition debate this issue, the fact is that though there are no simplistic solutions, a further increase in fuel prices will have a cascading effect. The Trinamul Congress and the Dravida Munnetra Kazhagam will do what is necessary to protect their political interests. The meeting of the Congress Core Committee will have to assess the situation after a careful review and it would take some time to arrive at a final solution.
The Budget has been a very good effort. Cutting the deficit is crucial and finance minister Pranab Mukherjee has balanced his options well. From the point of view of effective financial governance, the Budget is a sound political policy that would have to take hard decisions in the coming years.
The year 2010 is crucial. We need to “balance” the finances in the current year and ride out the storm for the next six to nine months. The rabi crop is good and can moderate prices. Also, climate change experts are indicating that the El Nino effect is waning and a good monsoon could push our gross domestic product growth rate to nine per cent. In theory, favourable factors over the next six months should influence economic events over the next few years. But it must be borne in mind that political issues are rarely determined by “statistics”.
The next few days will not be easy as the fuel price increase and service tax will push prices way beyond the 0.4 per cent estimate indicated by Prime Minister Manmohan Singh. Food inflation can get much worse before there is a visible drop in prices. The rich and the middle class have tax-cuts to balance the increased prices but the aam aadmi, who does not pay taxes because he doesn’t earn enough, has little relief and is hit the hardest by food inflation.
The common ground on food inflation and fuel hike gives the Opposition a shared agenda and there is little doubt that almost all Opposition parties, big and small, have realised that to battle the Congress it will be necessary to combine and consolidate their might, and votes. I think that with every Assembly election we will see a move towards this direction.
The first test of this will be in Bihar this year as the alliance of the Janata Dal-United (JD-U) and Bharatiya Janata Party (BJP) battles the Congress. I think we may find that the Rashtriya Janata Dal and the Lok Janashakti Party will be relegated to a distant third. The voter, as we have seen, tends to gravitate towards a combination with a winning chance and as things stand the JD(U) led by Nitish Kumar and the BJP will be the favourites, followed by the Congress. Workers from other parties are also likely to migrate towards these combinations. The same scenario will play out in West Bengal where the Trinamul Congress and the Congress may win by a two-thirds majority, leaving little space for the BJP or any other party.
The Assembly election in Uttar Pradesh will be a battle between the Bahujan Samaj Party and the Congress, with the Samajwadi Party and the BJP a very distant third and fourth. Here, again, vote banks and cadres will shift to the first two. All these Assembly results will together generate the final alliances for the 2014 Lok Sabha elections. Each state has its own compulsions and combinations and political parties and leaders have to find the magic combination for political relevance and longevity.
DESPITE THE foreign secretary-level talks with Pakistan, violence has escalated and there is little progress on the Mumbai terror attacks case while Mohammad Hafiz Saeed continues to spread hate and violence against India on a daily basis. The internal situation in Pakistan also continues to deteriorate.
We have had increased infiltration attempts in the Kashmir Valley that were foiled and there have been several fierce encounters for over a month in Jammu and Kashmir. The recent suicide attack in Kabul may well have been an attempt by rogue elements within the Inter-Services Intelligence establishment and we might have to revise our strategy.
The reality of the situation is that both in Pakistan and Afghanistan the writ of the government does not run. The influence of the United States — despite its military presence — is limited and the situation is further complicated by the lack of support in the US for the war in Iraq. In Afghanistan, the tiredness of the US and other allies is quite evident.
Our security forces have done well and despite the armed encounters, the Maoists have achieved little success. The arrest of Venkateshwar Reddy, alias Telugu Deepak, the suspected Maoist mastermind of the Sildah massacre, is a major success for the Central forces. Union home minister P. Chidambaram has restored people’s faith in our security apparatus. Despite the threats by Pakistan-based terrorists, the India-South Africa cricket series attracted capacity crowds and the Commonwealth Shooting Championship and the ongoing World Cup Hockey are a great success. Various security measures that have been adopted are excellent by any standards and I think very few will raise the issue of security for the Commonwealth Games 2010.
I strongly feel that Prime Minister Manmohan Singh, Congress president Sonia Gandhi and Mr Mukherjee should reconsider the fuel hike. In a market economy, you cannot “police” price rise to contain it, and if both political and economic stability can be achieved by reversing this decision, then it is a small price to pay.
By Arun Nehru
Arun Nehru is a former Union minister
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