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Pranab Mukherjee isn't the FM he could have been
Life is always uncertain, India's current economic and political environment even more so. Amidst this uncertainty, one proposition is reasonably certain. Whatever be the exit option, Pranab Mukherjee (PM) won't be around to present another Union budget. His contribution to Indian politics, parliament and policymaking (Planning Commission, defence, external affairs, EGoMs) is beyond question.
However, there is a more limited question about PM's role, not as de facto PM, but as finance minister (FM). By that, one doesn't mean 1982-84, when Euromoney judged him to be best FM in the world (1984). That was a different era.
Post-Reforms FMs
Since 1991, we have had Manmohan Singh (1991-96), P Chidambaram (1996-97), Yashwant Sinha (1998-2002), Jaswant Singh (2002-04), Chidambaram (2004-08) and Pranab Mukherjee (since January 2009), with Manmohan Singh filling a brief gap between November 2008 and January 2009.
People love rankings. Who has been the best FM since 1991? Responses are subjective. In my response, Manmohan Singh will always be No. 1 and this has nothing to do with whether reform blueprints were already in place by end-1990, before a decision to appoint Manmohan Singh as FM was made.
All said and done, as FM, he ushered in reforms and cleaned up import duties. In my response again, Yashwant Sinha is No. 2, because he cleaned up domestic indirect taxes and it is unfortunate that Yashwant Sinha never got credit that was his due.
What about the reverse question? Who has been worst FM since 1991? My response would be Chidambaram-II (2004-08) and Chidambaram-I (1996-97), in that order. The dream budget was overshadowed by the nightmare of the 5th Pay Commission. It is a sad state of affairs that, at the end of a glittering political career, PM (since January 2009), comes close to challenging the Chidambaram mantle.
If I still vote for Chidambaram-II for the wooden spoon title, that's because PM removed fringe benefit tax (FBT) and Commodity Transaction Tax (CTT) and public expenditure increases were a Chidambaram-II legacy. It is true PM was voted FM of the Year for Asia and FM of the Year in 2010 also. But that's because one believed deficit reduction numbers and the India growth story.
Deficit in Policy
Deficit is an outcome of revenue and expenditure. Take non-tax revenue first. PM-II's record has been less than spectacular. There is a tax reform agenda, articulated several times. This involves taxing income, not stuff that isn't income (FBT, CTT say). It involves standardisation and unification. It involves removal of exemptions. Stated differently, it involves transition to Goods and Services Tax (GST) and Direct Taxes Code (DTC), as they were originally meant to be.
What we actually have is GAAR and taxation of foreign borrowings. Import duties haven't been cleaned up (gold, branded jewellery). GST and DTC have been diluted and even those diluted forms are nowhere near implementation. Evidently, there is lack of consensus. There is near unanimity that one person in present government who has requisite political skills to negotiate with allies and states is PM.
Did 83 EGoMs and resolving crises within the party take up too much of his time? Constraints are never a convenient excuse. With sufficient constraints thrown in, every silly decision can be shown to be optimal. The upshot is that we haven't moved on tax reform agendas. We have moved away.
Spend Force
Expenditure is worse. Some expenditure (salaries, pensions, interest) is exogenously determined for FM. Even NREGS can be interpreted as exogenous. But that argument doesn't hold for subsidies and dangling the food security legislation. Nor does it hold for the inability to improve efficiency of public expenditure. Coalition politics is no argument. That's the constraints thesis again.
An FM who can't manage this (including resistance within the party) has no business to be FM. And a government which can't manage coalitions and deliver governance has no business to be in government. If you can't deliver on revenue and expenditure, you can't deliver on deficits either. As FM, PM's numbers were believed to be credible. He didn't doctor them and resort to sleight of hand, unlike some predecessors.
That credibility has taken a serious dent and present negative sentiments are largely because few people believe deficit numbers. Nor do they believe growth and inflation projections. Splice that with no movement on big-bang reforms. While that spills over into other ministries too, as the most important economic ministry, finance is clearly culpable.
2012 is not 1984
We can't continue to be Homer's Troy and blame the Greeks for the topless towers of growth being burnt down. The growth story has declined from 9% to something like 6%. (6.9% is for the full year of 2011-12 and is misleading.) 2012-13's Union Budget may or may not be PM's last budget, but it was certainly a lost one.
Posterity is always unkind. As FM, PM deserved to do better. He didn't and his budgets lacked vision, clarity and enthusiasm, reflected in meandering speeches without focus. This might have been fine in 1984. In 2012, India deserved better.
Pranab Mukherjee isn't the FM he could have been - The Economic Times
Life is always uncertain, India's current economic and political environment even more so. Amidst this uncertainty, one proposition is reasonably certain. Whatever be the exit option, Pranab Mukherjee (PM) won't be around to present another Union budget. His contribution to Indian politics, parliament and policymaking (Planning Commission, defence, external affairs, EGoMs) is beyond question.
However, there is a more limited question about PM's role, not as de facto PM, but as finance minister (FM). By that, one doesn't mean 1982-84, when Euromoney judged him to be best FM in the world (1984). That was a different era.
Post-Reforms FMs
Since 1991, we have had Manmohan Singh (1991-96), P Chidambaram (1996-97), Yashwant Sinha (1998-2002), Jaswant Singh (2002-04), Chidambaram (2004-08) and Pranab Mukherjee (since January 2009), with Manmohan Singh filling a brief gap between November 2008 and January 2009.
People love rankings. Who has been the best FM since 1991? Responses are subjective. In my response, Manmohan Singh will always be No. 1 and this has nothing to do with whether reform blueprints were already in place by end-1990, before a decision to appoint Manmohan Singh as FM was made.
All said and done, as FM, he ushered in reforms and cleaned up import duties. In my response again, Yashwant Sinha is No. 2, because he cleaned up domestic indirect taxes and it is unfortunate that Yashwant Sinha never got credit that was his due.
What about the reverse question? Who has been worst FM since 1991? My response would be Chidambaram-II (2004-08) and Chidambaram-I (1996-97), in that order. The dream budget was overshadowed by the nightmare of the 5th Pay Commission. It is a sad state of affairs that, at the end of a glittering political career, PM (since January 2009), comes close to challenging the Chidambaram mantle.
If I still vote for Chidambaram-II for the wooden spoon title, that's because PM removed fringe benefit tax (FBT) and Commodity Transaction Tax (CTT) and public expenditure increases were a Chidambaram-II legacy. It is true PM was voted FM of the Year for Asia and FM of the Year in 2010 also. But that's because one believed deficit reduction numbers and the India growth story.
Deficit in Policy
Deficit is an outcome of revenue and expenditure. Take non-tax revenue first. PM-II's record has been less than spectacular. There is a tax reform agenda, articulated several times. This involves taxing income, not stuff that isn't income (FBT, CTT say). It involves standardisation and unification. It involves removal of exemptions. Stated differently, it involves transition to Goods and Services Tax (GST) and Direct Taxes Code (DTC), as they were originally meant to be.
What we actually have is GAAR and taxation of foreign borrowings. Import duties haven't been cleaned up (gold, branded jewellery). GST and DTC have been diluted and even those diluted forms are nowhere near implementation. Evidently, there is lack of consensus. There is near unanimity that one person in present government who has requisite political skills to negotiate with allies and states is PM.
Did 83 EGoMs and resolving crises within the party take up too much of his time? Constraints are never a convenient excuse. With sufficient constraints thrown in, every silly decision can be shown to be optimal. The upshot is that we haven't moved on tax reform agendas. We have moved away.
Spend Force
Expenditure is worse. Some expenditure (salaries, pensions, interest) is exogenously determined for FM. Even NREGS can be interpreted as exogenous. But that argument doesn't hold for subsidies and dangling the food security legislation. Nor does it hold for the inability to improve efficiency of public expenditure. Coalition politics is no argument. That's the constraints thesis again.
An FM who can't manage this (including resistance within the party) has no business to be FM. And a government which can't manage coalitions and deliver governance has no business to be in government. If you can't deliver on revenue and expenditure, you can't deliver on deficits either. As FM, PM's numbers were believed to be credible. He didn't doctor them and resort to sleight of hand, unlike some predecessors.
That credibility has taken a serious dent and present negative sentiments are largely because few people believe deficit numbers. Nor do they believe growth and inflation projections. Splice that with no movement on big-bang reforms. While that spills over into other ministries too, as the most important economic ministry, finance is clearly culpable.
2012 is not 1984
We can't continue to be Homer's Troy and blame the Greeks for the topless towers of growth being burnt down. The growth story has declined from 9% to something like 6%. (6.9% is for the full year of 2011-12 and is misleading.) 2012-13's Union Budget may or may not be PM's last budget, but it was certainly a lost one.
Posterity is always unkind. As FM, PM deserved to do better. He didn't and his budgets lacked vision, clarity and enthusiasm, reflected in meandering speeches without focus. This might have been fine in 1984. In 2012, India deserved better.
Pranab Mukherjee isn't the FM he could have been - The Economic Times
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