Why is the UPA so nervous?

It is two years since the second United Progressive Alliance (UPA) government was elected to power with a stronger-than-before mandate, independent of outside support from the Left. The political Opposition to the ruling coalition has become weaker in this period. Yet, paradoxically, having entered his eighth year as Prime Minister of India, if Manmohan Singh

seems less than enthusiastic, the reasons can be summed up in two words: inflation and corruption.
Dr Singh’s obsession with economic growth has not diminished a bit. He started his speech on Sunday evening by pointing out that the country’s gross domestic product (GDP) had grown by an average of 8.5 per year over the past seven years despite high fuel and food prices. He promptly added that India will soon become the fastest growing economy in the world having already become the fastest growing democracy in the world. With mandatory mentions of “inclusive growth”, the Prime Minister acknowledged the reality on the ground (using generalities he loves): “The challenge of social sustainability of growth is today a universal challenge. Rapid growth and urbanisation have contributed among other things to increased inequalities and inequities”.
The economic czars of India today have realised that there is indeed a trade-off between growth and inflation. Consequently, they are belatedly trying to curb persistent inflation by jacking up interest rates that would inevitably result in a slowing down of industrial investments as well as loan-driven acquisitions of real estate and cars. The Reserve Bank of India (RBI) has projected the rate of growth of GDP for the financial year ending March 31, 2012, to be somewhere between 7.4 per cent and 8.5 per cent, significantly below the nine per cent (+/- 0.25 per cent) estimate put out by the ministry of finance in its Economic Survey presented in late-February.
For the first time in recent years, economists at the RBI have not minced their words by arguing that the Indian economy may soon go through a phase of “stagflation”, or a period when a decline in the economic growth rate is accompanied with inflation. With headline inflation still at an uncomfortably high of nearly nine per cent, the RBI stated that “policy interventions are necessary” to control inflation even though risks to growth remain. The country’s central bank pointed out that inflation would moderate slowly in 2012 but remain above the “comfort level”.
With diesel prices (and perhaps, the prices of cooking gas and kerosene) expected to rise in the near future, the government is clearly fighting a losing battle against inflation. The dependence on imported crude oil (around 80 per cent at present) is unlikely to diminish in the foreseeable future.
The Prime Minister said: “As an importer of oil we have to adopt rational pricing policies. This is not just prudent fiscal management. This is a national security imperative. India cannot become too dependent on external sources of supply of our energy”.
On the issue of corruption, if the government thought it was sending out politically correct messages to the public, the presence of Dravida Munnetra Kazhagam (DMK) leader and former Union minister for shipping, road transport and highways, T.R. Baalu, next to Sonia Gandhi told an altogether different story. Whereas Dr Singh was able to resist the inclusion of Mr Baalu in his council of ministers two years ago, the circumstances relating to the appointment of A. Raja (in Tihar Jail since February 2) as communications minister for a second term are too well known (thanks to the Niira Radia phone conversations becoming public).
Since public memory is supposed to be very short, it is worth recounting a few facts relating to Mr Baalu that have nothing to do with the kilometers of highways built during his tenure, nor with the number of persons who occupied the chair of the head of the National Highways Authority of India or with the fact that between May 2004 and October 2008, not a single one of the 47 projects in the second phase of the North-South-East-West national highways programme was completed.
According to replies given in Parliament by Mr Baalu’s own former deputy, the then minister of state K.H. Muniyappa, Tamil Nadu was the beneficiary of 30 road projects worth `10,000 crores during his tenure as minister — this amount comprised one-fifth of the total money spent on developing national highways all over India.
Do you have any doubts about why voters in Sriperumbudur had elected Mr Baalu? But does that also explain why the people of Tamil Nadu have so decisively voted the DMK out of power? Why, unlike Mr Raja, was Mr Baalu denied a ministerial berth? Here is a possible reason. Between November 2007 and February 2008, the Prime Minister’s Office forwarded no less than eight letters requesting the ministry of petroleum and natural gas to expedite the allocation of natural gas by Gail (formerly Gas Authority of India Limited) at concessional rates to two firms controlled by Mr Baalu’s two wives/partners and two sons. The then minister for petroleum and natural gas, Murli Deora, had remarked: “Every day we get requests from people… If somebody tells me that this is a question of 2,000 people losing their jobs, I will call people, I will ask my officers to help. We are here to help, not harass people... There is no nepotism involved”.
The Left is demoralised having been decimated in its bastion in West Bengal. The Bharatiya Janata Party (BJP) is in disarray, desperately keeping B.S. Yeddyurappa government in Karnataka afloat (with more than a little help from governor H.R. Bhardwaj). The Congress and the UPA should be exuding confidence. Yet curiously, this is not happening. On the contrary, despite the absence of any threat to its stability, the government’s representatives often appear beleaguered, mechanically mouthing platitudes and wishfully hoping that the image of the ruling regime will get automatically refurbished in the coming two years.

Paranjoy Guha Thakurta is an educator and commentator