Budget Memories, As India Awaits FM Sitharaman’s 100-Year Tryst

This article was first published on Jan. 26, 2021.

Raghav Bahl has dug into his memory trove to write personal accounts about six of India’s powerful post-liberalisation finance ministers. This mini-memoir is written in two parts, with the first one featuring Jaswant Singh and Manmohan Singh, while the second part dwells on Yashwant Sinha, P Chidambaram, Arun Jaitley, and Pranab Mukherjee.

A few days back, I had written about the exclamatory contributions of two former finance ministers, Jaswant Singh and Manmohan Singh. While both had remarkable tenures, they collectively accounted for just seven years of a mercurial 30-year reform journey. There are four other titans with whom I enjoyed several memorable moments. It felt a tad uneven to skip those. So here is a tiny ode to the prolific, fierce foursome, whose stories may come in handy for Finance Minister Nirmala Sitharaman as she scripts her once-in-a-hundred-years’ budget.

Again, I’ve had to wrestle with the pecking order. Who should come next in the exclamatory sequence? And once again, the re-choreography of memories has thrown up an unconventional name – the tad unlucky Yashwant Sinha.

He was an ex-IAS officer from Bihar who did the unthinkable of quitting the civil service to hitch his political wagon with the maverick Chandrashekhar. He was the finance minister during that six-month aberration of governance in 1990 when the Kuwait War almost forced India’s economy to implode.

Legend has it that he had authored large chunks of the emergency rescue act that destiny had willed for Manmohan Singh, his successor in 1991, to unveil. While the authenticity of this myth shall forever be challenged, eight years later Yashwant Sinha did become a “regular” finance minister in Prime Minister Vajpayee’s first NDA government in 1998, and kept the job when Vajpayee was re-elected in 1999.

Sinha was the archetypal tragic hero of a Shakespearean tale. He had to steer the economy through unimaginable turbulence caused by the post-nuclear test sanctions, the Asian currency crisis, and the Kargil war. Hand on heart, he did a stout job. His seminal contribution—besides breaking with the colonial hangover of the budget speech at 5 p.m—was a massive rationalisation and reduction of excise taxes. He deregulated the petroleum industry and allowed mortgages to be tax-deductible, creating conditions for a housing boom. He also ushered in perhaps the lowest interest rate regime India had ever experienced until then.

Unfortunately, Unit Trust of India blew up in his face, and he was honorably discharged from the finance ministry, swapping portfolios with Jaswant Singh and walking over to the foreign office.

I remember a late evening call with him just around his exit.

Yashwant Sinha (sounding a trifle subdued): I understand that you are running a full show mapping my time at finance. I hope you will be fair. I was dealt a very tough hand. But look at the macro-economic variables, especially low-interest rates, that I am leaving behind. If nothing else, this will reignite our economy.

I nodded silently into the phone, promising to be clinically objective. I wonder whether I was.

He had the job for almost a third of the post-reform years, serving two adversarial political formations and three prime ministers. He also had a famous temper. He always combined sharp legalese with a tensile financial intellect. He had the audacity to slash taxes in the late 1990s in his “dream budget”. I had my most infamous run-ins with him, but he always had to win every argument. There was no other option!

I remember an especially acerbic exchange after his potentially crippling waiver of farm loans before the 2009 polls. His otherwise fiscally disciplined hand was perhaps forced, for his face was crimson through the interview. But the skirmish I recall with some distress was an earlier one over his proposal to tax employees’ stock options. He had decreed that the tax would be levied when the option was exercised, not when it was sold.

In my view, that was plain wrong, even extortionary, since employees would have to pay tax without having realised a penny in cash; worse, if the stock price fell, they would have paid a tax on a loss! It was bizarre, but the redoubtable Chidambaram stuck to his stand, and the perverse tax is still on the statute book.

I knew Arun Jaitley much before he became ‘Arun Jaitley’. He was my senior at school, and I’ve paraded before him in junior-school knickers. I have given a copious account of our relationship in this obituary I penned after his most untimely demise.

He had a momentous stint from 2014-19, but always remained an ace lawyer although a somewhat bemused finance man.

He also had the unenviable task of clearing the economic wreckage created by demonetisation.

I remember peddling the proposal of a Temasek-like trust or holding company of all sovereign assets. It was early 2015. The presentation room had an awesome cast, from Finance Secretary Rajiv Mehrishi, Chief Economic Advisor Arvind Subramaniam, and then Revenue Secretary and now RBI Governor, Shaktikanta Das. But Jaitley, who was at the head of the table, was strangely disinterested in my exertions. I later learned that the government had already decided to launch the National Investment & Infrastructure Fund, so my idea had, in a sense, been pre-empted.

Pranab Da was an unusual finance minister for circa 2009. He had earlier held the job in the 1980s, when the Indian economy was a labyrinth of discretionary controls and government largesse. Those were days of licenses, quotas, and bans. The budget speech used to be an extended yawn spelling out nine separate excise duties for six different types of yarns! So, I believe he was quite at odds with a fledgling free-market economy in which licenses had been abolished and foreign capital/goods flowed through easily.

I met him rarely when he was Finance Minister. Once he had asked for a small favor, and I had complied with his wish. His memory and grace were so enormous that when I met him a few weeks later, he did say “thank you for agreeing to my request”.

I wish I could agree so generously with his economic philosophy, but alas, it was too old-world for me.

Raghav Bahl is Co-Founder – The Quint Group including BloombergQuint. He is the author of three books, viz ‘Superpower?: The Amazing Race Between China’s Hare and India’s Tortoise’, ‘Super Economies: America, India, China & The Future Of The World’, and ‘Super Century: What India Must Do to Rise by 2050’.