By Anjan Roy
The ailing Former Finance Minister Arun Jaitley’s greatest achievement at the North Block was to act as a cushion in times of crisis which was not his making— he had absorbed the entire shock of demonetisation and GST and sought to maintain as far as possible an even keel. No other finance minister had to head the finance ministry in times of two fundamentally disruptive episodes. He could emerge from them by and large unscathed.
As the former finance minister, Arun Jaitley, is lying struggling with his illnesses in the capital’s AIIMS hospital, his absence is being felt. Now the question is arising in the context of the ailing state of the Indian economy, whether the finance minister of the country has a particularly important role in steering the economy.
Nirmala Sitharaman has been in public life for a long time now and had adequate exposure to the travails of politics. She had given leadership in the defence ministry in her stay. Unfortunately, to the extent there is a shorter term dimension of the current slow-down in the economy, the dominant public feeling is that some of the policies and utterances of the new finance minister did not exactly help an already deteriorating sentiment.
Surely, in this short period since becoming finance minister, Sitharaman could not have wrecked the machine. But she had failed to work with alacrity and convey the impression of being in charge.
In the industrial grapevine the talks are already spiralling in volume that someone else would have fitted better into the large shoe left behind by Jaitley in the North Block. Name of Piyus Goyal is cropping up, but for the fact that he had somehow lost his head when at the helm in the North Block during an earlier bout of Jaitley’s illness.
Industrialists are pointing out that it is difficult to communicate with the new incumbent who appears to have a pre-set mind. The new ministers’ equation with the senior most bureaucrats in the ministry are also not that easy, as during the days of Jaitley.
She did not inspire confidence as minister. Without exactly saying it, Jaitley had been able to generate the belief when it came to a crunch, he would be there —“main hu na”. He could thus talk up the market, he could cajole the foreign investors to bring in funds.
The best part of Jaitley’s period at the ministry was “not to rock the boat”. Jaitley had maintained stable rates of taxation and was not too ambitious about the tax revenue. Even after the introduction of the new GST regime, the minister had repeatedly admitted shortcomings of the new system and tried to rectify the anomalies.
Nor did he try to jack up the rates even in the face of revenue shortfalls after GST introduction. Notwithstanding the political decisions to hurry though GST and announcing the sudden “demonetisation” —which is learnt to have taken even him by surprise— Jaitley’s greatest success was in maintaining the tempo. He had justified it, knowing that it was not justifiable. With quick improvisations he had sought to minimise the adverse impact of such a massive disruptive move.
In contrast while the current slowdown was in the making, Sitharaman did not make an effort to grapple with it. On the contrary some moves had helped hasten it further.
A small part of the current slowdown has to be laid at her door, even though she has not been at the finance ministry for long. Two of her main planks, an effort to keep to deficit targets even when the economy was evidently losing pace, and reverting back to stringent income tax regime had unnerved already circumspect investors.
The budget proposal for a special tax charge for highest income brackets had plagued investment sentiment in the secondary markets. The flow of funds from overseas had also gone down. In fact, there has been withdrawals as well.
It is important that the finance ministry is holding some consultations with the leaders of Indian industry and business and making efforts to address their current concerns. That used to be a customary mode earlier times. Sitharaman had scrupulously avoided meeting industry and business, maybe for fear of being criticised for proximity to them.
It seems now that prime minster himself is taking over the initiative to rectify the situation and begun consultations. It is important to demonstrate that the government is concerned over what is happening and searching for ways to come out of it expeditiously. (IPA Service)