Monday, June 18, 2012

Manmohan Singh to clean up Pranab Mukherjee’s mess at the finance ministry?

Part of this piece has appeared in the Mumbai edition of DNA on June 18, 2012

It looks like that prime minister Manmohan Singh is only too keen to take over the finance ministry and undo many of the distortions that according to him have crept in during Pranab Mukherjee’s tenure as finance minister from 2008 to 2012. There is already talk that the retrospective taxation measure introduced in the Finance Bill 2012, keeping in mind Vodafone bucking the tax liability after it had purchased shares from Hutch in Cayman Islands in the Indian telecom operator, Essar Vodafone. It was seen as a major irritant and there was much concern in India Inc., circles that it would be a dampener on foreign direct investment (FDI). Mukherjee and his finance ministry stuck to their guns and they argued that India is not a tax haven. It would seem that Singh would like to untie the knot without appearing to have overruled Mukherjee’s move. This seems to be just one of the many changes that the prime minister would want to bring about in the finance ministry that Mukherjee is leaving to contest for the president’s office.
Singh is not alone in believing that the Mukherjee tenure at the finance ministry has not been good enough. There is a small but articulate section in the Congress party which believes that Mukherjee as finance minister has been a disaster. It might seem unfair because the US financial market meltdown, which has triggered worldwide recession, happened around the time Mukherjee moved to finance ministry. It has not been easy after that. There are strong critics of Mukherjee in the Congress who believe that he has made a bad situation worse through the manner he handled the economic situation.
So, were there differences between Singh and Mukherjee, and did they not see eye-to-eye on policy issues? Was the so-called policy paralysis due to Singh-Mukherjee tussle as to what should be done to deal with the global economic recession and its dampening effect on the Indian economy and not so much due to recalcitrant West Bengal chief minister Mamata Banerjee? Why were these differences not discussed and debated by the commentariat? Why did the experts blame the government instead of pinpointing the Singh-Mukherjee divergent views? And how is it that even before Mukherjee has left the ministry, moves are afoot to make thorough changes?
We know that there is a battle of ownership over economic reforms in this country. Received wisdom is that Singh ushered in reforms in the crisis year of 1991. Mukherjee seems to believe otherwise. He is of the view though he has not claimed it publicly that it was he as finance minister who had let in reforms as finance minister in the early 1980s. There are of course the discernible differences in perspective with regard to reforms. Mukherjee was not really the dyed-in-the-wool Congress socialist, and it is one of the reasons that many of his party fellows are suspicious of him. He has shown himself to be friendly to the Indian private sector without too much argument and without much of an apology. So, in the 1980s we saw the real surge of the Indian private sector players, small and big. The only time that Mukherjee articulated his philosophy of economic reforms has been in the 2012-13 Budget he had presented in March this year when he stressed on “domestic demand driven growth”. So, he was not relying  excessively either on exports or on foreign direct investment for the buoyancy of the economy.
Singh on the other hand does not seem to have trusted the Indian private sector. He believed in globalisation because he thought that foreign competition through foreign direct investment will shake up the primitive corporate practices of the Indian players. He also put his faith in exports because the foreign exchange reserves would help in keeping the economic worthiness of India above the waters.
This does not mean that Mukherjee is a home-grown free marketer and Singh is external-oriented reformist. There is much to be said for both the approaches. But Singh has never stated explicitly except rarely his policy orientation. It was while addressing the 2004 the World Economic Forum-Confederation of Indian Industry (CII) summit that he said that when he opened the door for foreign competition that he was confident that the Indian private sector would do well though corporate India was apprehensive of the entry of foreign players. 
It is sad that given the compulsions of Indian politics, neither Mukherjee nor Singh could argue out their respective positions, and the country would have had a better understanding of what is going on in the name of reforms. Mukherjee was caught in political management in the government and the taciturn Singh never as good at telling about the reforms agenda.
So, what will be seen as a mess by Singh and his aides may not be so for Mukherjee who was pushing decisions with a certain policy framework in his mind. As a politician, Mukherjee owed it to the country to speak about policy matters. But his energies were absorbed in playing politics – both in the constructive and not-so-constructive – as he understood it and which he seemed to enjoy thoroughly. It appears that he should have spared more energy for articulating policy because he is quite good at that. Singh does impress when he speaks his mind, but he refuses to do so. He prefers pushing things quietly, which is not a political thing to do.


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