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The Advocate and the Professor Omkar Goswami
Towards the latter half of the United Front regime, I was interviewing P. Chidambaram about his record as Finance Minister. In the middle of the interview, I asked him what it is like to be such a forthright reformist minister in a motley cabinet of some fairly strange characters. Chidambaram then was not renowned for diplomatic talk. Yet, what he said was revealing, and I remember almost every word of it. “I have had the full support of both Mr. Gujral and Mr. Deve Gowda”, said he. “If you do your homework right and have the courage of conviction to state your argument and logic without fear, you will be surprised at how much you can achieve.”
Public memory is short, and it is easy to forget what Chidambaram did in his two budgets. In a much more hostile, anti-reform environment, he leveraged a GDP growth of 7.8 per cent to pilot a successful one-off tax amnesty scheme, simultaneously reduce the maximum personal income tax rate to 30 per cent and the corporate tax rate to 35 per cent, and substantially clean up the number of tariff and excise lines. He also set up the Disinvestment Commission under G.V. Ramakrishna; introduced major changes in the Companies Act — including the introduction of buy-back of shares and ESOPs; and continued with the Congress Party’s reform programme of reducing tariff rates. His only major trip-up was regarding the Pay Commission report. The Left insisted on implementing the pay hikes for the civil service without accepting the recommended cuts in the numbers employed. Chidambaram hated it then; and hates it to this very day. Today, Chidambaram comes back to North Block with Manmohan Singh as his Prime Minister. It is a very different world from the chaotic one that he saw under the United Front. All indicators suggest that India is clearly on a higher growth path. The industrial sector is back to clocking over 6.5 per cent growth; services are steadily growing at 8-8.5 per cent per year; IT exports are rising at over 25 per cent per annum; foreign exchange reserves are all set to touch the $120 billion mark; and even the worst pessimist would agree that India should achieve at least 6.5 per cent GDP growth in 2004-05 — this coming on the heels of 8.1 per cent growth in 2003-04. Most importantly, Chidambaram has Manmohan to give him support. The new Prime Minister is not just an excellent practical economist. He has a shrewd political mind, and a possesses a keen sense of what will sell when, and what won’t. It is absolutely true that Manmohan Singh could do what he did in his first three budgets because of the support of P.V. Narasinha Rao. However, Rao was no economist. He gave his broad directions, suggested what couldn’t be done for the moment, and left the rest to his Finance Minister. In this respect, the Union Budget for 2004-05 will be different. I am willing to bet that there will be much closer consultation between the North Block and thee PMO — and that the Budget will have the joint imprimatur of the advocate and the professor. Having said that, it won’t be an easy budget to craft. While Chidambaram has the advantage of revenue buoyancy, he will still have to deal with many difficult issues. How can he raise public investment for major infrastructure without affecting the fiscal deficit? How can he deal with his cabinet colleague from Magadh, who wants to accelerate the process of bankruptcy of Indian Railways? How will he tackle the spectre of rising state deficits? The new Finance Minister will be spending many late nights between now and end-June. But you can be sure of one thing. Going against his grain is not a Chidambaram virtue. He isn’t about to start it now. Backed by Manmohan Singh and Sonia Gandhi, Chidambaram will present a strong, reformist budget. I was concerned about the pace of reforms with the change in government — especially given the need to secure support from the Left and the Samajwadi Party. With the professor and the advocate, I am sleeping much easier. And may they succeed, as they did earlier.
Published: Business world, June 2004
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