It's ironic, but in the process of trying to save the government from the backlash of the Raja scam, the prime minister's minders have put him squarely in the middle of the flak. Until now, most people, including the worthies in the CAG, believed the prime minister's only fault was that he was hamstrung by coalition politics, that he had asked A. Raja to auction spectrum, but the latter refused to do so.
So when a crack team, including a retired bureaucrat, crafted a strategy which included taking on the CAG, one argument it put forward was that the prime minister had never asked Raja to auction spectrum — with Raja's arrest, the only fig leaf that stood between his actions and the prime minister has been removed. There are enough letters from Raja to the prime minister, on November 2, 2007 to show the prime minister had been kept in the loop on all his actions — so far, everyone, including the CAG, focused on only the PM asking Raja to auction spectrum. The focus has now shifted and those letters are back in play once again.
The opposition, which looked like it was breaking up, with the BJP appearing to have lost interest and the CPM agreeing to ensure the budget session went off well, looks energised once again. The CBI arrested Raja to quell the Supreme Court's anger. Kapil Sibal announced the outline of his auction-is-best policy for the future (after having debunked auctions earlier) to take the sting out of the Opposition's demand for a JPC — well, Raja's arrest has changed all that.
Kapil Sibal argued that since auctions were not required by law, there could be no scam in not auctioning spectrum. This is completely fallacious since it was decided in 2003 that auctions would be used for all new licences — the fact that the BJP chose to violate this within days of coming up with the rule doesn't mean the rule never existed. In any case, even if there wasn't a law, what prevented the UPA from putting it in place given that it had got 573 applications for just 122 spectrum slots it had available?
The idea of the one-man Justice Shivraj Patil committee to examine policies since 2001 was to try and dilute things by passing the muck around — this would show that the original distortion of the first-come-first-served policy to avoid auctioning licences was done by the BJP. This is what Raja argued and it shows how out of touch the rest of the government was when, even after Raja's departure, it adopted the DMK's party line as the UPA's party line.
Just like the government missed the anger at the corruption, it misread the change in the country's dynamics, the fact that telecom wasn't environment or steel or any other old-world sector. Not too many players in steel or power or those aggrieved by environmental clearances (Ajit Gulabchand is the odd one out) go and take on the government. In telecom, however, it is pretty routine to do so, it's been happening for years (read the latest Tata petition against Raja to understand just how explicit it can get); each big player in telecom has an army of analysts and lawyers who can cite the IART TCA backwards (that's TRAI Act!), who can point out where the government is going wrong and why it is citing the wrong precedent. In the modern economy, there is nowhere to hide. That's why we're seeing even smart officials/politicians constantly being wrong-footed by well-briefed journalists.
Given the government's refusal to smell the coffee, and the fact that the Raja scam investigations have now acquired a momentum of their own with the investigations being supervised by the Supreme Court — next week, the CBI has to tell the court what it has found, who Raja's co-conspirators were in the scam, and more — it's difficult to predict just which way the chips will fall.
What is certain though is that we can safely expect bureaucrats/politicians to be a lot more cautious, a lot less ready to take decisions that can later be questioned. Things will change over a period of time, they always do, but for the moment bureaucratic decisions will be slower in coming. This will necessarily compound the slowdown that has taken place in investments, and not just in foreign direct investments — from 38.1 per cent in 2007-08, investment-to-GDP levels across the country fell to 34.5 per cent in 2008-09 and then rose a bit to 36.5 per cent in 2009-10.
This is a pity, but there's nothing that can't be reversed over the next couple of years. It needs the government to get out of its current state of denial, to stop treating the current crisis as a college debate where, if it is given the time, it can argue its way out of the problem. At the end of the day, no matter how smart Kapil Sibal is, he can't convince anyone that the companies didn't make a killing from the licences and that the government would not have got a large part of this had it auctioned the licences. Beyond this, the rest is irrelevant.