Testing times

A physically enfeebled Atal Behari Vajpayee faces a politically and administratively challenging second year in his present term as Prime Minister.

AN anniversary derives its significance from what has preceded it and what could reasonably be expected to follow. If current indications persist, Prime Minister Atal Behari Vajpayee, after having conducted high-level confabulations over the previous mon th with leaders of the two nuclear superpowers, will spend the first anniversary of his renewed term in office under heavy sedation in the post-operative unit of a Mumbai hospital. Though the medical prognosis offers the promise of a reasonably quick ret urn to managing the affairs of state, it will be a considerable length of time before the Prime Minister is restored to the degree of physical mobility that is required of a man entrusted with the high office he holds.

Crucially, the weeks and months following the Vajpayee government's first anniversary in office will demand political and administrative decisions of a high order of sensitivity. The Union Cabinet meeting of September 23 and the political caucus of the r uling alliance that followed later that day, provided a foretaste of the many thorny issues that will demand the attention of the Prime Minister in the next few months. How far he would be in a position to attend to these is a matter of some uncertainty.

On the administrative front, the new turbulence in the global economy, epitomised by burgeoning crude oil prices, represents the single biggest challenge to economic management in close to a decade. The oil pool account, which is meant to manage situatio ns of price volatility, has long since been neutered as an instrument of policy. It is today in deficit to the extent of Rs.25,000 crores.

The government has reportedly decided on a three-pronged strategy to combat this problem. An increase in the retail prices of petroleum products would obviously be the main thrust of the policy response. But the magnitude of this increase would be cushio ned by a slash in the excise and customs duties levied on petroleum and its products. The rapid increase in prices would in any event mitigate any possible fall in revenue stemming from the cut in rates.

The Finance Ministry is not, however, facing the most comfortable of fiscal situations and would be averse to giving away too much from the windfall revenues that it stands to gain from the oil price spiral. But a degree of self-denial by the managers of the fiscal apparatus is considered the minimum requirement of political prudence. Such a course of action would also retain the faith of coalition partners such as the Trinamul Congress and the Dravida Munnetra Kazhagam (DMK), which have challenging Ass embly elections in prospect early next year.

The third part of the strategy involves floating bonds in the international market to make good the drain of foreign exchange resources that the oil crisis has caused. This would be the second coming of the Resurgent India Bond, which was floated after t he Pokhran nuclear tests in 1998, to cushion a part of the impact of the economic sanctions that followed.

The first round of these bonds had won the enthusiastic endorsement of the Bharatiya Janata Party's ideological camp-followers within the Indian diaspora in the United States. But a second such act of faith cannot be taken for granted. Market conditions in the U.S. and indeed, globally, have plunged into new uncertainties, partly because of the oil prices situation. The rupee has been under enormous pressure in recent weeks because foreign exchange operators have rushed to buy dollars in anticipation of heavy demand in future for paying oil import bills.

The inflationary impact of the oil crisis will be twofold. First, the direct effect of increased fuel prices will feed itself into a number of secondary consequences. Moreover, the deflation of the rupee value would put upward pressure on the prices of a ll imports. After some years of low inflation, the economy seems to be entering a phase of quickening price increases, with all that it means for the wage bargaining process in various sectors.

Overall growth prospects are rather bleak. The recent spurt in national income growth has been underpinned more than ever in the past by the rapid escalation of the revenue account deficit of the Union government. Where once capital spending and investme nt in infrastructure provided the main impetus to growth, today it is essentially the consumption expenditure of the growing middle class that supports the economic edifice. And sustaining this consumption, in turn, is the massive revenue account deficit of the Union government.

It is an accurate reflection of public perceptions on the prospects of the Indian economy that after months of often jittery make-believe, the country's main stock markets are today reaching the depths of despondency. That this should come immediately af ter Vajpayee's triumphal tour of the U.S. when he supposedly opened up exciting new vistas in economic cooperation between India and the world's industrial powerhouse, must seem especially mortifying to the Prime Minister.

The unrest that has followed the government's effort to reform the administration of telecom services is part of this crunching descent to reality. A country that was preening itself as an infotech superpower was being reminded that it is yet to put in p lace a viable communications network. Like the petroleum sector, telecom has been considered a major source of revenue for the Union exchequer. The implications of the proposed reform for the overall budgetary balances of the Union government remain a bi t uncertain. This has invited the Finance Ministry's opposition to the proposals. But there seems little clarity in the government on how to respond to the conflicting requirements of making a symbolic gesture to the global investment community and shori ng up its own crumbling revenue sources.

WHEN these rather difficult administrative decisions are left aside, the Vajpayee government faces a series of demanding choices on the political front. A number of States, including politically weighty ones such as Assam, West Bengal, Kerala and Tamil N adu, are scheduled to hold Assembly elections early next year. With the exception of Kerala, the BJP and its allies have serious stakes in most other States. The jockeying for position has already begun, most notably in the case of West Bengal, where Mam ata Banerjee of the Trinamul Congress has raised the pitch of her political vitriol to a level rarely seen in relations between the Central government and a State.

The key fact that the National Democratic Alliance has had to confront after over a month of Mamata Banerjee's exaggerated histrionics is that it has no real options in West Bengal. The invocation of Article 356 of the Constitution to dismiss an elected State government has virtually been ruled out of court. After a series of decidedly dubious efforts to use this constitutional provision for partisan purposes - both by the BJP-led government and by the United Front government that preceded it - were thw arted, this emergency provision of the Constitution has fallen on bad days. Neither have Mamata Banerjee's more fanciful suggestions, like using the provisions of the Armed Forces (Special Powers) Act in parts of West Bengal, won any favour.

It has always taken a great part of Vajpayee's persuasive powers to divert Mamata Banerjee from her more quixotic quests. Whether he will carry equal conviction in his enfeebled post-surgical state, remains to be seen.

ANOTHER possible source of dissension from within the ranks is former Law Minister Ram Jethmalani, who has been spoiling for a fight ever since he was unceremoniously ejected from the Union Cabinet. His ire is especially focussed on Attorney-General Soli Sorabjee, and Minister of State for Information and Broadcasting Arun Jaitley, not to mention Chief Justice A.S. Anand. His effort to dig up material that could show up his perceived detractors in a poor light, has lost none of its vigour. And Jethmalan i is known to be a man who is willing to rush into battle with even imperfect weapons, making up in rancour and controversy what he may lack in terms of factual basis and efficacy.

It is also more than probable that the Central Bureau of Investigation (CBI) will give a new impetus to the prosecution of the Bofors payoffs case in the fortnight before Vajpayee is due to enter hospital for his surgery. This second set of indictments i n the Bofors case could bring into sharp focus the role played by an influential family of financiers based in London, known to be very close to elements of the BJP. And while it could set off paroxysms of alarm within the Congress(I), which is already d eeply piqued by the indictment of the late Rajiv Gandhi in the first set of charge-sheets, its impact within the BJP could also be profound.

Following the inauguration of his second term as Prime Minister, Vajpayee has had a rather extended honeymoon, though this has been largely on account of the continuing disarray within the ranks of the main Opposition party. The visit to the U.S. and the visit of Russian President Vladimir Putin were expected to underline Vajpayee's arrival on the world stage as a statesman setting the agenda for the new millennium. But the deviations from the script have begun well before the first anniversary observan ce. The political mood now seems to foreshadow a more fractious and combative environment for the physically enfeebled Prime Minister to deal with.