Govt's credibility has taken a serious hit: Experts

MJ Akbar, Chairman and Director of Publications - Covert, doesn't expect Left parties to change their stand at the last moment. He thinks the credibility of the Government has dissipated.

The cost of the deal with the Samajwadi Party will be high in UP seat sharing, he said. 

While Rajdeep Sardesai, Editor-in-Chief of CNN-IBN, feels the Government may struggle with numbers in case of vote of confidence.

The Prime Minister will emerge stronger if the the Left leaves, is his opinion.

Sardesai said that if the government goes with a confidence vote, the PM will have room to maneuver. 

Excerpts from CNBC-TV18's exclusive interview with MJ Akar and Rajdeep Sardesai:

It’s a strange situation that government may become weaker but Dr Manmohan Singh, the Prime Minister over time may become stronger as a result of the Left leaving the government if not today then on the 10th or 11th sometime this week. I think that’s the paradox and that’s something we will have to see how that’s plays out leading to a general election sometime next year.

Q: What the market would be interested in knowing , is there any slip possible between the cup and the lip. Should the market now draw the conclusion that this is a done deal with the Samajwadi Party and they do not want to think about elections, do not have to think about elections till March-April-May next year or could there be any possible slips?

Sardesai: There can be slips because the numbers in Parliament and the government will have to go through a vote of confidence will be razor-thin. The Samajwadi Party has 39 MPs (Member of Parliament) and all 39 need to come along with the government. It is significant that the Samajwadi Party is also holding a meeting today because there have been concerns that some of those MPs maybe tempted to go over to the Bahujan Samaj Party. So should that happen then the government gets into a tough numbers game and will actually require the support of six independents who are in the Parliament to get a clear majority, so it is a delicate number game but having gone this far one would sense that there is a slight momentum within parliament at least with the government; it may not be outside and I think Mr. Akbar is right that the government’s credibility has taken a knock.

But in terms of surviving this vote of confidence at the moment the government looks likely to survive and should it then survive then it doesn’t need another vote for six months, an elections will only take place in April-May which means the government has about eight months to somewhere get things right and back on track once again and a week is a long time in politics and eight months is an eternity.

From the market’s perspective if the government goes through in the first week of August with this confidence vote as it looks likely to do then Mr Manmohan Singh actually strangely enough might have more elbowroom to manoeuvre without having to look over a shoulder constantly of the Left undermining him on an economic reform. Mr. Amar Singh is dashing off letters to the government but it’s obvious that those letters are driven by corporate interest and not necessarily by any ideological policy interest and I think it’s easier to manage an Mr. Amar Singh in that sense than it is probably to manage the Left.   

Q: Assuming that general elections have been postponed to some time next year, from here up until now, would you say it’s a period of political uncertainty or it’s just going to be a quite sort of limbo?

Akbar: When you talk of time one has to understand how much time. Mr Sardesai says a week is a long time but a long time can go in either direction. I frankly don’t see the effects of inflation reducing their impact on the results just because you have bought three months more, you haven’t bought more than that.

When we talk of April-May elections, one must not forget that the Election Commission Process comes into play about two months before that and after that the government really has not jurisdiction, no authority to continue its functioning, it passes on to the election commission. So what Dr Manmohan Singh has bought at best is three months from November to January.

I can’t really see the trends that are already in play in market, the disaffection that you see on the ground turning around. If we look from last August to now, we can see a visible trend. If the same play had been made in last August, the Congress party would have been much stronger.

Mr Sardesai compares the cost of the deal with the Left with the cost of the deal with the Samajwadi Party (SP), one should examine what that means. What that means is that the congress is now surrendering a whole lot of space, it will probably not get 10-12 seats in an alliance with the SP in Uttar Pradesh (UP), which means the Congress will disappear not only from Bihar where it is not more than 4-5 seats, to 10 seats in UP, which means the Congress in order to get this one nuclear deal which may or may not happen, for that the Congress is ready to cede the whole space from the whole of the Gangetic plain. In political terms that is an enormous if not publicized fact that literally from UP, Bihar, Bengal, the Congress disappears and when and if which may happen 4-6 years later these regions tire of regional parties, which is both Mulayam Singh and perhaps Mayawati then the only national party that will be left in play will be the BJP.

I think nobody is thinking through the consequences of these rather pyrrhic decisions and pyrrhic victories which get lot of play in the immediate term but I don’t think anybody is thinking through the consequences of these decisions that are being made. Even in terms, Mr. Sardesai was very kind to market when he forgot to mention the name of the ministers whose heads are being demanded as a consequence of this alliance but they are the Finance Minister, they are Oil and Petroleum Minister which is of direct interest to the audience in the market.

I don’t think the terms of the affair with the Left, were probably actually far better off of Dr Manmonhan Singh than the terms of the affair that he is going into the last phase of this government slide. Because the Left whatever their rhetoric really knew the boundaries, really understood but Mulayam Singh is in play for very immediate political games. His thinking is limited to UP, his survival in UP, politics in UP and he doesn’t really bother too much about other issues.

Q: To scratch that point a bit further - do you think that the demands of the SP at this point and if they are indeed inspired from any corporate allegiances are all bark and no bite because that is going to be a more market sensitive issue?

Sardesai: I think this is not a marriage of convenience; this is a marriage of desperation between the Congress and the Samajwadi Party in fact it’s a marriage of desperation on all sides. The Congress allies who didn’t want early election, it’s the Congress Party who in someway had tied itself up in knots over the prestige of the Prime Minister over the Indo-US nuclear deal, its the Samajwadi Party itself whose cadres were drifting towards the BSP who were also in a state of desperation as a result to preserve its flock. So both sides were desperate.

When Mr. Amar Singh makes these demands to the Congress Party or Mr. Amar Singh makes these demands to the UPA – one must understand he is not in a very strong bargaining position himself. He is trying to position himself vis-à-vis his own flock to suggest that he hasn’t sold out his party as well. Mr. Akbar rightly mentioned that the Congress will find it difficult in the medium and long-term in the Indo-Gigantic plain and in the Uttar Pradesh ,so will the Samajwadi Party.

So when Mr. Amar Singh makes demand that “I want the Finance Minister out, I want Mr. Deora out.” It is largely rhetoric; designed in some ways to serve corporate interest, it’s also designed at another level to try and consolidate whatever remains of his political identity and that of his party. But its clear the nature of letters that he is dashed out whether it’s on spectrum allocation, whether it’s on windfall tax on petroleum that he is been seen today to bat for corporate interest.

I do not think that the Prime Minister at this moment is going to oblige Mr. Amar Singh on specific issues. I think both sides have constrains heading into next elections. We have got resurgent Ms. Mayawati and they need to deal with her. I think we have to see it as a marriage of desperation between two desperate groups; the UPA on one side and the Samajwadi Party on the other.

Q: Let me rephrase the question differently: there is one view among the optimists that once this new alliance is cobbled up without the Left between the Congress and the SP, the Prime Minister has maybe eight-nine months in government and for government which is been bottled up and constrained in terms of making any kind of moves along the reform path for the last two-three years they may actually try and push ahead with something by way of reforms in the last eight months of their tenure. Is that been too wishful or is there a possibility that may happen?

Sardesai: Too wishful; what are we looking at banking reform, pension reform, the nature of the parliament – it’s a fractured fragmented Parliament; it’s tough to push through these kind of legislations. You couldn’t push through the Indo-US nuclear deal in Parliament, you are going to find even more difficult to push through economic reform bills.

I think the question for the Prime Minister at the moment is he is doing a holding job; the big challenge for them is inflation and is also perhaps the farm loan waiver creating some kind of momentum again back in your favour.

So I think he is going to have spent a lot of time in (a) managing the fallout in the Indo-US nuclear deal and (b) tackling inflation. I do not think that gives him space to make any dramatic economic reforms; it would be nice to think so. I believe strangely enough that while the government has been weakened by all that’s happened, the Prime Minister is actually been strengthened. Is he going to bite the bullet? He should have bit for the last four years. It’s always toughest to take the tough decisions in the last six months when you are in power because you are constantly looking with one eye on the electorate and Mr. Akbar is again right that there are elections not just in April-May; I might remind you there are big elections taking place in December.

Can you afford to take tough economic decisions before then? Unlikely at the moment- I am afraid so. Do not expect anything dramatically different from the UPA government; all I can say is some of the sniping that’s been going on constantly as a result of the Left being in an unnatural alliance with the government; I think that will end in the months ahead.