Agenda. Role calls

Narendra Modi, like most high achievers, has a stellar track record in turning adversity into opportunity. The best example of that is how he turned around his image after the monumental governance failure of the 2002 riots, painting himself as a victim of a liberal witch hunt. Now, facing his first potential scandal as prime minister, Modi needs to pull a rabbit out of his hat. Good thing for him, the rabbit might just be waiting to be pulled out.

If Narendra Modi does not sack Sushma Swaraj over the Lalit Modi saga, he will lose enormous political capital. Having won on the back of an anti-corruption, anti-Congress wave, he will find it difficult to justify Swaraj’s continued presence in the cabinet. The Opposition will keep gunning for him, possibly stall work in Parliament over the issue and paralyse the government much like what the BJP did when it was on the other side of the floor.

If Modi wants to put governance and the economy back on track, which is in his best interests, then he has to ask the foreign minister to leave ‘till an investigation is completed’. That will give him an opportunity to rejig his cabinet — and that’s when he can pull the rabbit out of the hat by putting Arun Jaitley in the foreign ministry and bringing in Raghuram Rajan as finance minister.

Lutyens insider

By most accounts Jaitley has been a disappointment as finance minister, but he remains Modi’s closest confidante and headlines manager. Cynics even claim that he is behind the recent headlines against Swaraj, with whom he has shared an uneasy relationship for long. Notwithstanding his disappointing stint at North Block, Jaitley will have to be given a ministry of suitable importance as a face-saver. And what can be better for the suave lawyer than the foreign ministry?

As finance minister, Jaitley has often looked like a fish out of water. His rambling, stop-start interim budget speech last July set the tone for a mediocre performance over one year. Economist Swaminathan Aiyar called it a ‘Chidambaram budget with saffron lipstick’. The bold reforms and vision that were expected of a Modi budget were missing even in the first full budget this February.

The reason Jaitley was made finance minister — leapfrogging candidates like Arun Shourie with better domain expertise — was that Jaitley was seen as somebody who could rally bipartisan consensus around key reforms and help the passage of controversial bills. But that theory has not worked. In fact, since he led the BJP’s opposition to reforms such as the GST Bill during the UPA regime, having Jaitley as finance minister firmly reduces the government’s moral authority to get these bills passed considerably.

And there have been completely avoidable slip-ups: the Minimum Alternate Tax (MAT) demand spooked foreign investors and went completely against the Modi government’s claim that it will stay away from the ‘tax terrorism’ of UPA. The new income tax return form, which seeks to know details of expenditure on foreign travel, for example, was another big faux pas, which again pointed at an adversarial tax regime and unnecessary regulation.

If the Modi government was elected to get rid of Lutyens Delhi’s champagne socialist hangover, then the insider Arun Jaitley is clearly the wrong person to administer that remedy. Lutyens derives its power from an environment of over-regulation that fosters cronyism and rent-seeking, cripples fearless innovation and scuppers big ideas. Jaitley is too much a part of that rent-seeking Lutyens class (just check out his record at the helm of the Delhi cricket association) to truly break this stifling system.

To put it in one line, Jaitley in the finance ministry is the biggest conflict of interest for the Indian economy.

Battering ram

In the rarefied Lutyens world, the Sushma Swaraj-Lalit Modi conflict of interest case is as common as red beacon cars. Unfortunately for Swaraj, her emails were leaked and one news channel in particular went to town demanding her resignation. But the larger problem is the manner in which big business connects to big politics in an over-regulated environment. Unfortunately, none of the conversations during the present scandal have focused on that.

If Modi is serious about his goal of significantly improving the ease of doing business in India, then he must first take on the entrenched interests in Lutyens — top bureaucrats, judges and politicians — who perpetuate the crony system. And to break this nexus, he needs a battering ram from outside the Lutyens circuit: someone like Rajan.

Apart from his domain expertise and the outsiders’ perspective, Rajan will bring immense moral heft to the finance ministry. The Opposition, particularly the Congress, which appointed him Reserve Bank of India governor, will find it difficult to challenge Rajan’s reform measures with the same vehemence they do Jaitley’s.

For Modi and the BJP to deliver on the sky-high pre-election promises, bold reforms are needed. The Swaraj scandal is the perfect opportunity for Modi to move the underperforming Jaitley out to the foreign ministry and put the economy back on track. That can only help his government and the people of this country. There is certainly no conflict of interest there.

Sambuddha Mitra Mustafi is the founder of The Political Indian; @some_buddha

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