I served as Chief Economic Advisor for a while - and was eased out by the Finance Minister's favourite to make room for Shankar Acharya. I continued to be interested in the goings on in the finance ministry. I also thought highly of Atal Bihari Vajpayee, but not of his management of his cabinet. This column from Business Standard of 10 October 2000 is a comment on the politics of that time.
TO TAKE IT OR NOT TO TAKE IT
It looks as if Shankar Acharya is leaving the post
of Chief Economic Advisor. Nor is it for a cushy post in Washington; the rumour
is that he is going to join Indian Council for Research on International Economic Relations. ICRIER
was once a graveyard for defunct bureaucrats. Today it would not be an accurate
description. Still, the chattering classes are likely to regard Shankar’s move
as a precipitate fall.
He obviously does not, and can argue why not. Even
if his explanation is accepted, the move will attract speculation. For the job
fit Shankar like a glove. He once was an Economic Advisor. He could not take
any more of Deepak Nayyar, the then CEA; so he packed his bags and left for the
World Bank. Deepak in turn could not stomach my appointment as Chief Consultant and left. Then, when I
was removed as CEA, Shankar was brought in. For the next five years, Shankar
was Montek’s alter ego.
The team broke up when Montek was sent to the
Planning Commission. But that in a way brought Shankar into his own. Piyush
Mankad, Montek’s successor, is a consensual worker; he concentrates on getting
things done with the least friction. (He is too good to last.) The result was
that Shankar had independent access to the finance minister for the first time.
He seemed to enjoy it immensely. Hence the surprise: what made him quit?
The search or the lobbying for the successor is on.
Of the hopefuls, one is a friend of mine. Another is a dancer. (For those who
are not in on this in-joke, Jagdish Bhagwati gave a talk in India Habitat
Centre in summer 1998. At one point, he turned to Jaswant Singh, who was
presiding, and said, “Who are your economists? I have heard a couple of names.
If those people are economists, I am a Bharat Natyam dancer.” A dancer is
someone in Jagdish’s profession; an economist is one so recognized by a
committee of Shri Shri Shankaracharya, Shriman Murli Manohar Joshi and Shriyut
Balrao Thakre). The third is an economist.
The question is: should the dancer take the job?
Clearly, he should not take it if he is going to face Shankar’s problem, that
Yashwant Sinha shows little interest in Shankar’s advice. The question before
the dancer is whether he does so because the advice comes from Shankar, or
whether Sinha has lost interest in the economic angle on policy. I very much
fear the latter.
It was not always the case. When he removed Montek
and brought in Vijay Kelkar, Sinha wanted to table, together with the budget, a
statement on the reforms he was going to do. Vijay was thrilled. But I advised
him otherwise. I had a strong sense that Sinha was going to make a sensational
budget (we are talking about 1999). He needed to rescue the idiotically managed
Unit Trust of India, and anything he did would please the market. Besides, he
seemed genuinely interested in making a mark then as a great finance minister;
Vijay was equally keen to do real reforms, and not just to talk glibly about
them in the inherited fashion.
So I advised Vijay that the white paper on reforms
should be postponed. I said FM was going to get a good press over the budget;
he did not need the white paper to do it. He should release it at the end of
the budget session, when his coverage had fallen off. That white paper never
saw the light of day, and Vijay was packed off for having done a good job.
Mine was good advice in light of the facts as I knew
them. But then, I did not know the inside politics. Detailing specific events
would reveal too much, so let me paint the broad picture.
We have a Prime Minister who simply does not bother
with details. He also trusts his lieutenants a lot; and some of them have
strong views on policies that have economic implications. But their
understanding of economics is highly variable and, on the average, poor. This
is how we find that although the PMO keeps up pressure in the right direction
in respect of, say, telecommunications policy, or foreign investment, or public
sector disinvestment, it also puts crazy ideas into the PM’s mouth, such as the
roads from east to west and north to south, or doubling of agricultural
production in ten years, or lowering the SSI limit. Normally it would be the
job of the Principal Secretary to remove such inanities and inconsistencies.
Let me just say that the PPS is not doing that job, whatever else he is doing.
With a passive Prime Minister and hyperactive
messengers, there is bound to be friction between the PMO and the finance
ministry. For the finance ministry is both the home of economic policy and the
guardian of the treasury. If it keeps getting disjointed directives from the
PMO, it cannot fulfil either of its duties.
Unless it has a finance minister who is willing and
able to act as finance minister. And I am afraid Sinha cannot. He is an upright
man; he also has basic understanding, and it is possible that left to himself,
he would manage the finances competently and do some reforms. But he has not
been left alone. It is not just the PMO. Every BJP leader makes demands on him,
usually improper ones, and unfortunately he has yielded too often.
Could he act otherwise? Could he stand up and be a
proper finance minister? I do not know what the sufficient conditions would be,
but the necessary condition is that the Prime Minister should pursue the same
goals of financial soundness and reform as the finance minister. In other
words, the FM can act boldly only if he has the implicit assurance that the PM
would back him up every time, and that he would not do or say anything that
publicly undermined the FM’s autonomy.
Unfortunately, the senior officials in the PMO do
not see things in that light; in their view, the finance ministry is poorly led
and coordinated. They think the solution is to plant their protegés in the key
posts – those of finance secretary and Chief Economic Advisor.
That, I am afraid, will not work. A subservient
finance ministry may be in the interests of one or other official of the PMO.
But the PM – and I mean the PM – needs a strong, independent finance ministry to deal with and discipline his
reckless, rapacious and loquacious ministers. He cannot avoid making political
deals; that is precisely why he needs a finance minister who would not. That
would strengthen his hand. It is in his own interest.
If the FM came into his own, he could use a good
dancer. But if, as is likely, he cannot, he would be best served by a devout
economist, who would at least cook up good chants.
