Manmohan Singh 2.0 - A whole new PM?
Accused of being ‘the weakest PM ever’ by the Opposition and seen as the presiding deity of Policy Paralysis, the Prime Minister has hit back with a raft of reforms. How did this happen -- and will the changes help his party? Saubhadra Chatterji finds out.delhi Updated: Oct 28, 2012 01:11 IST
An hour of daily early morning walk on the treadmill is Prime Minister Manmohan Singh’s recipe to stay in shape.
For the rest of the day—till he wraps up his work around 10.30-11 pm — Singh’s routine primarily revolves around shaping up the economy to make it run on the fast track once again.
His calm, often monotonous voice has always been able to camouflage emotions and will remain so. But according to observers, in the past few months it has gathered a unique flavour of assertiveness.
A cabinet minister didn’t find Singh mincing words when the PM told him he held him responsible for “single-handedly trying to derail” India’s growth agenda. This, when the cabinet minister in question is seen as someone close to both party president Sonia Gandhi and her son Rahul.Already 27 Group of Ministers (GoMs) and 12 empowered GoMs (EGoMs) have been reduced almost by half to speed up the decision-making process as the PM felt he is headed towards a "now or never" situation in the economy.
When Pranab Mukherjee resigned as finance minister on June 26 to contest the presidential poll, within the next two hours the Prime Minister had convened a meeting with his economic advisor C Rangarajan to discuss the future strategy.
“Next day, from 10 AM to 4 PM a series of meetings took place in the PMO on various aspects of the economic situation,” said an aide to the PM.
In recent cabinet meetings, the PM’s body language indicated an urgency to regain the momentum it lost even after his party returned to power with a record 207 seats in the Lok Sabha.
In one such meeting, rural development minister Jairam Ramesh’s arguments against the FDI policies were cut short by Singh. The PM asked him to let P Chidambaram (PC) speak as “he is the finance minister”. In the next meeting, Vayalar Ravi’s apprehensions on reforms were dismissed and Singh reminded the former trade union veteran that “we have to take decisions”.
In another cabinet meeting, Ghulam Nabi Azad prompted a rare, two-minute long intervention by the PM where he spoke on cutting expenses and following the path of austerity. On all three occasions, the PM allowed PC, his trusted lieutenant in North Block, to have the final say.
Observers see a new consistency in the Manmohan 2.0 shift from Policy Paralysis to Policy Proactiveness. This has been aided by several factors.
The PM and Mukherjee, senior to Singh in the politics, had an arrangement to avoid addressing each other as “Sir”.
Mukherjee called him “Dr Singh” in person and on the phone, a simple: “Pranab here”. The change in guard in North Block brought back the “Sir” from PC’s end. More important, it saw the FM on the same page as his boss on all key issues.
Sanjaya Baru, former media advisor to Singh, however, dismisses the theory that differences between PM and Mukherjee held back the pace: “After initial setbacks in UPA 2, both of them became risk-averse as strong support from the party for the policies was not always forthcoming. Now the government has acted because a crisis was staring at their face.”
In 1991, then finance minister Singh was staring at a balance of payment crisis and India’s possible foreign exchange bankruptcy. He knew that there were very few options but to open up the economy and end the license-raj. He also had a supportive Prime Minister in Narsimha Rao who gave him a free hand.
In 2012, Singh’s job is arguably tougher. The looming economic crisis was coupled with a tiresome war against corruption charges levelled against the UPA. Opposition parties earlier denounced him as “the weakest PM”.
Now they are baying for his blood. There is a demand for him to come before the JPC on the 2G spectrum scam. They also ask him to “resign” over “Coalgate”— the allocation of coal blocks during UPA regime.
What turned the tables is the party’s decision to finally provide unflinching support for the Prime Minister’s economic roadmap.
The Congress dumped its biggest supporter — the Left parties — in 2008 to support Singh on the Indo-US nuclear deal. In 2012, it again dumped its biggest ally — this time the Trinamool Congress — to stand firm behind its best middle-class mascot. Last year, during the fuss over FDI, the party brass remained mum.
This time, Sonia and Rahul not only defended the decisions but directed party leaders to launch an aggressive campaign in support of reforms.The markets had welcomed Singh’s taking charge of the finance ministry, his quick announcements on retrospective tax proposals and General Anti-Avoidance Rules.
The Sensex further cheered up on the FDI policies and clearance of pension and insurance bills. But soon, the sentiments of the market were overshadowed by news in the media about fresh allegations of corruption, led by Arvind Kejriwal and Co.
For securing support for the Indo-US civilian nuclear agreement in UPA1, Singh had reportedly used the ultimate weapon — his willingness to resign if he couldn’t take action as the Prime Minister in the national interest.
But scouting for the party’s backing on economic measures in UPA2 — even at the cost of risking the coalition’s political goodwill — Manmohan Singh has never threatened to quit. Instead, he has emphatically said at least on two occasions that he will stay the course.
Almost every day meetings are held between Chidambaram, plan panel deputy chairman Montek Singh Ahluwalia, Rangarajan, and principal secretary Pulok Chatterjee.
BVR Subrahmanyam, a joint secretary also plays an active role in these meetings. When the new railway minister CP Joshi came to meet the PM for his directions, Singh immediately redirected him to Ahluwalia and PC to draw a “long-term plan” for the railways.
Daman Singh — who comes to visit his father almost every morning — and Upinder Singh, the PM’s two daughters have also started giving inputs on his speeches. And witty cabinet colleagues quickly point out that after Congress’ “Core Group” here is the “Kaur group”.
Singh is still worried about two areas: energy and infrastructure. But his office claims, more big-bang measures will soon come to tide over not just the economic blues but also uplift the morale of the party that is busy firefighting endless charges of scams and corruption.
Montek Singh Ahluwalia
Deputy Chairperson, Planning Commission
A day after briefly taking charge of the finance ministry in June, PM Manmohan Singh got down to the task of summoning top financial administrators to halt an embarrassing slowdown in an economy, which, until recently, was an engine of global growth.
Singh first sought the counsel of Montek Singh Ahluwalia, planning commission deputy chairperson, to revive the sagging economy and, possibly, soothe the nerves of angry industrialists and anxious investors.
A key player and member of the team who led India onto the high growth trajectory, Ahluwalia was instrumental in crafting economic reforms.
The broad outline of reforms was not very different from those undertaken by many developing countries in the 1980s.
Where India’s measures differed was in the more gradualist pace at which they were implemented. This is where the Oxford-educated Ahluwalia has played a seminal role.
Time magazine described him as the government’s brain and as the chief policy advisor instrumental in charting the way ahead.
The respect he commands can be gauged from the fact that he has held key positions in different governments. He served as member of the Planning Commission under the BJP-led NDA government and was later appointed by the Congress-led UPA as Deputy Chairman of the plan panel.
Many expect Ahluwalia, the PM’s trusted sherpa in policy making since 1991, to play a key role in steering India’s economy out of the current slowdown.
“As the task involves tackling the most serious problem since the 1991 reforms — inflation, a global crisis and a weaker rupee — Ahluwalia and other technocrats will play a key role,” says a senior Delhi-based industry leader. In the last few months, Ahluwalia’s schedule has been packed.
India’s richest man and Reliance Industries Ltd chairman Mukesh Ambani, his brother and ADAG chairman Anil, Vodafone India chairman Analjit Singh, Kingfisher Airlines boss Vijay Mallya, HCL’s Shiv Nadar, NRI billionaire and Vedanta Resources chairman Anil Agarwal, Videocon chairman Venugopal Dhoot and IDFC’s Rajiv Lal are among those who have called on Ahluwalia at his Yojana Bhawan office.
C Rangarajan, Chairman, Economic Advisory Council
Very few Indian policy makers know as much about the state of the economy as the Reserve Bank of India (RBI) governor.
Little wonder then that the PM depends on his economic advisory council headed by former RBI chief Rangarajan to get a true picture of the situation.
More often than not, it is Rangarajan and his council of eminent economists that do the spade work to tone up the economy. Under Rangarajan, the central bank gained substantial freedom to conduct monetary policy primarily by getting the government to agree to pay market rates of interest for its borrowings and by reducing its right to monetise deficits at will.
The discontinuation of automatic monetisation of central government deficits was a big step towards fiscal correction as well as giving RBI functional autonomy in conducting monetary policy.
As chairman of the PMEAC, Rangarajan has never been found wanting on articulating arguments for sound economic policies, even though these may appear politically unpopular.
“He has always held the need to move a market-linked system of pricing of petroleum products to boost India’s medium and long-term growth prospects,” said an economist, who has worked closely with Rangarajan.
Most recently, when the government raised the price of diesel by R5 a litre, Rangarajan argued the case for higher prices, not shying away from being shouted down by the popular notion that high fuel prices will likely fan inflation.
His views are: it’s imperative to trade short-term price pains for medium-term growth. High subsidies have widened the government’s fiscal deficit — shorthand for the money that it borrows to fund its expenses — limiting elbow room to spend on investing in infrastructure and development schemes.
The EAC has been set up to provide a sounding board for inculcating awareness in the government on different points of view on economic issues.
Rangarajan’s tenure as RBI governor also saw unprecedented central bank activism to put in place measures to strengthen and improve the competitive efficiency of the financial sector. He has brought in the same dynamism in New Delhi’s fiscal policy making.
P Chidambaram, Finance Minister
The UPA government silenced its critics last month by boldly ushering in reforms such as foreign direct investment (FDI) in retail, aviation, insurance and pension, shortly after biting the bullet on fiscal discipline by raising prices of diesel and cooking gas.
These reforms carry the unquestionable stamp of P Chidambaram, who returned as finance minister (FM) three months ago. Many expect the 66-year-old Harvard-educated former two-time FM to steer us out of the economic mess.
From a country-wide Goods and Services Tax to a direct taxes code, from allowing FDI to opening up the banking sector, Chidambaram is expected to carry on the unfinished reforms agenda, most of which he unveiled in his stint as FM in UPA I.
“We were confident that he will set in motion quick actions to revive flagging investor sentiments and restore the driving forces of the economy,” said a senior Delhi-based industry leader. This is his third stint as the FM, a position he earlier held in 1996 in the United Front.
Ignoring carping allies and protesting rivals in a delicately poised coalition, Chidambaram has shepherded what looks like the second innings of sweeping change regaining the advantage that seemed lost after criticism from the international media, think-tanks and credit-rating agencies.
With the 2013-14 budget likely to set the tone for the 2014 Lok Sabha elections, industry captains, economists and politicians will keenly watch the pace at which reforms are initiated.
Chidambaram’s 1997-98 budget was hailed as the “dream” budget for announcing measures that brought about a paradigm shift in macro-economic policy. He brought down the peak income tax rate to 30%, something unthinkable at the time.
It has remained the peak rate ever since. He introduced the Voluntary Disclosure of Income Scheme aimed at harnessing ‘black money’ for productive purposes. India has had an annual average growth rate of about 6% since reforms in 1991.
Chidamabaram guided the economy as FM between 2004-2008 where India grew at a scorching 9% plus. Add up these changes and Chidambaram will have created an enviable body of work as India’s finance minister.
(Inputs by Gaurav Choudhury)