A journalist for 18 years, I have been writing on business with special focus on automobiles, commodities and management. Corporate stories are my forte but that has not restricted me from writing on diverse subjects such as sports (especially Formula 1), films, music and so on...
P Chidambaram has been India’s longest serving Minister of Finance (seven-and-a-half years, across three governments). In fact, the senior Congress leader has, in different capacities, been involved in shaping the Indian economy for more than three decades. He has also had a turbulent three years as Minister of Home Affairs (2009-12), during which he had to contend with the Telangana movement, the 2011 Mumbai bombings, and a surge in the Maoist movement.
It’s safe to say that the suave, articulate lawyer-by-training is battle-scarred. After two straight terms as a member of the ruling party, Chidambaram is now at a vantage point to critique and assess the current administration. In a freewheeling chat with Forbes India, he evaluates the performance of the Narendra Modi-led government as it completes a year in office. He gives the National Democratic Alliance government its due where required but holds back no punches where he feels it has failed to live up to the expectations of the people. Excerpts from the interview:
Q. Do you think the Modi government has lived up to expectations as it completes its first year in office?
They have made a lot of announcements. Let me accept that their intentions and goals are good. But if you measure performance against the spate of announcements they have made, I am afraid their performance falls far short of people’s expectations. They are completing one year, which means 20 percent of their term is almost over. That’s a lot of time. On the ground there must be something concrete and visible either in terms of infrastructure, investment or a new major social justice programme. I can’t name any single achievement that will stand out as notable. It is a lot of sound and fury.
Q. Are we seeing a policy paralysis of a different kind today with decision-making centralised at the PMO [Prime Minister’s Office]?
In the UPA [United Progressive Alliance] government, there was no policy paralysis. In fact, there were a lot of policy initiatives. But I think there was, in the last few years of its [the UPA’s] term, a certain incapacity to deliver on those promises or clarify its policies from time to time. In the case of the NDA government, there are intentions and announcements but there is no policy. Take, for example, the 100 Smart Cities programme. Just because you announce it a hundred times, a hundred smart cities don’t come into existence. Where is the blue print for one smart city? Likewise, the UPA started the [National] Skill Development Mission. It had a clear goal/focus, an instrument and a chief executive to implement it. Now the NDA government has said they are renaming the programme as Skill India. Does Skill India mean anything more than continuing with the Skill Development Mission? The problem with this government is the complete centralisation and concentration of power in one person and his office—the PMO. Therefore there is a total inability to translate a policy into framework, breakdown a policy framework into objectives, crystallise objectives into milestones, and then move towards them. I think they simply do not have the capacity to understand what implementing a policy means.
Q. The external environment has been very kind to this government…
Yes. Crude oil and commodity prices have fallen sharply and this is a huge bonanza for the government. I am afraid they simply do not know how to capitalise on this opportunity.
Q. The present government has benefited from far-reaching reforms and measures that the UPA government took towards the fag end of its tenure.
In fact, they are only carrying out many of our initiatives. Take, for example, Jan-Dhan Yojana. They claim to have created 13 crore accounts, but that stands on the shoulder of the 24 crore accounts we had created. They have tried to black out these 24 crore accounts and, in fact, I am surprised that the Reserve Bank of India [RBI], when it talks about Jan-Dhan, talks only about the 13 crore accounts but does not own up to the 24 crore accounts which the banking system created on the direction of the RBI under its financial inclusion programme. It is a sad commentary on the neutrality and objectiveness of the RBI.
The Direct Benefit Transfer scheme is only a continuation of what was launched earlier. They just overcame the apprehension that there will be consumer opposition and pushed it through for LPG.
The Insurance Laws Amendment Bill had already been introduced by us. They had stalled it then, but have now passed it, but without saying mea culpa. The GST Bill had already been introduced; they are taking it up now. In a sense they are reaping the benefits of the seeds that we had sowed earlier. But that is the right of every successor government. We don’t grudge that right.
Q. Despite a solid majority in the Lok Sabha, the government is finding it difficult to pass laws. Do you think they should be doing things differently?
I recently told Mr Arun Jaitley at a public gathering to imagine what UPA would have done if it had 282 seats. The highest we had was 206. With 282 seats, it is a wasted opportunity. They should have been far more generous and accommodative because, ultimately, the weapon of majority is in their hands. Because of their disdain for dialogue, disdain for regional parties and, above all, their deep-seated hatred for the Congress party, they did not reach out to the Opposition. From day one, Mr Modi should have done that knowing fully well he has the ultimate trump card, which is the majority.
Q. And also considering that he does not have a majority in the Rajya Sabha…
Rajya Sabha is really no obstacle. All finance bills can be passed in the Lok Sabha. It does not require Rajya Sabha’s concurrence or consent. It will remain there for 14 days—whether they pass it or not, it does not matter. For all non-financial bills, you could have built a coalition around each of them. If the Lok Sabha passes a bill with a huge, comfortable majority, the Rajya Sabha will follow suit. Show me an example where the Rajya Sabha has actually blocked a bill passed by the Lok Sabha with a comfortable majority. They may delay it but the Rajya Sabha knows that it is the Lok Sabha that is the House of the people.
Q. Congress helped the government pass the Insurance Laws Amendment Bill. Can we see similar cooperation when it comes to other crucial legislations?
Congress will not keep quiet. It is the Opposition. The BJP [Bharatiya Janata Party] was the Opposition and stopped the insurance bill session after session for four sessions, despite my making several trips to Ms Sushma Swaraj’s chamber where she, Mr Arun Jaitley and once even Mr Yashwant Sinha were present. We won’t play that obstructionist role, but certainly play the role of an Opposition, which means we have a say in deciding when a bill will be passed, whether it will be passed with or without amendments.
Q. What will be your stand when it comes to GST?
I am told there are eight changes in the bill introduced by Mr Jaitley from what was introduced by our government. I have not yet studied the changes. I will study them and if my party asks for my view, I will give them.
Q. What is wrong with the Land Acquisition Bill in its current form?
I have very practical views. I welcome one or two changes that have been made. So we are, again, not being obstructionist. Firstly, the government has to make a strong persuasive case as to why it became necessary, before the end of 2014, to amend a bill that was passed in 2013 near unanimously (just two or three isolated voices of opposition and BJP supported it), without giving it a fair trial. The government has not made such a case.
Secondly, if a state government felt strongly that the bill has to be amended in its application to its state, it could have passed the necessary amendments and the President can consent to it under Article 254(2). Why bring it to Parliament again? Leave it to the states. After all, the states are going to acquire the vast majority of the land.
Thirdly, the government has still not explained why the social impact assessment and the consent clause which requires consent from 70 percent of the affected families is not in tune with the spirit of freedom, transparency and equity that pervades political and social dialogue in the 21st century. In the 19th century, nobody was concerned about the environment. Today it is universally accepted that environmental concerns have a major role to play in policy decisions.
Q. How important is the Land Acquisition Bill in attracting investment into the country?
It is important. Because, ultimately, land has to be acquired. Land can come out of two sources—the government must already have a land bank or land must be acquired. But, in India, we tend to overplay our hand. If you want to build a hospital, 100 acres is allotted. Why do we need 100 acres to build a hospital? Similarly, universities are allotted 200 acres. There are universities in London and New York which are vertical [in construction]. This is really land hoarding. And the [proposed] land acquisition law will be used for that purpose, which is why the consent clause and social impact assessment are relevant.
Q. Do you see the gambit the government took in delaying fiscal consolidation to fuel public spending and thus kick-starting growth working?
I opposed the delay. They should have stuck to the timetable. However, the delay is a minor one and therefore we can forgive them their trespasses. But, having delayed it by a year, where is the government using that 0.3 percent headroom it has got for itself by stretching the fiscal deficit from 3.6 percent to 3.9 percent? The plan expenditure is coming down while non-plan expenditure is going up sharply. This 0.3 percent is entirely for non-plan expenditure which is why I question the quality of the expenditure they are making from the additional resources that delaying the fiscal consolidation gave them.
Q. Where do you see economic growth in the next 12 to 24 months?
It will come. You see, the economy had got over the slump and had started accelerating. It moved from 5 percent to 6.9 percent in 2013-14 and that momentum has carried it to 7.4 percent in 2014-15 and that will continue. There is nothing to arrest the momentum. If you do nothing, that growth will still come. The point is, what are you doing to accelerate the growth? What are you doing to prevent another international crisis from arresting your growth?
Q. As the finance minister, you were frustrated by the RBI’s hawkish stand on interest rates. You even remarked that you are willing to walk alone. Of late, you have supported the RBI’s work. What has changed between then and now?
Mr Subbarao [former RBI governor] simply refused to move one way or the other. His position was standstill. That, I don’t think, helps the economy. Nor was he willing to articulate and explain why he was taking such a stand. In the case of Mr Raghuram Rajan [current RBI governor], he is willing to state his position, argue and defend it. Therefore there is scope for engaging and debating with the RBI. That debate—both with the government and the RBI and between outside critics and the RBI—has resulted in two rate cuts. Mr Rajan has not stood still like Mr Subbarao did. He has either been persuaded or been obliged to do two cuts. He has also tweaked some other instruments which have indirect bearing on monetary policy. What he now says is that he does not share the government’s optimism about growth or inflation. He is very data driven. If he has the data or if he expects to have the data which supports his argument, then I think we have to give him the benefit of doubt. I still think the RBI is behind the curve. The two cuts should have come earlier and even now there is room to cut interest rates.
Q. What are your views on the monetary policy framework that the government and the RBI have put in place?
It is the correct thing to do. There are very few countries that give absolute authority to the central bank. The US and the UK have Monetary Policy Committees [MPCs]. India’s MPC was recommended by the Financial Sector Legislative Reforms Commission. I strongly support that recommendation. There must be an MPC. We can debate about the composition of the MPC, whether the government should have a representative on the committee, and the million dollar question—whether the RBI governor should have a veto over the MPC’s recommendations. These things can be worked out. A phased solution can also be worked out, where the governor can have a veto for the first two-three years and then, as the MPC gains experience, he can give up his veto. There is enough room to accommodate different points of view.
Q. Do you think the Direct Taxes Code is history?
No. It is not. The Standing Committee on Finance has made a recommendation that the Direct Taxes Code [DTC] must be enacted. The best draft to start with is the original draft that I had published. Then Mr [Pranab] Mukherjee made some drastic changes to the draft, many of which are questionable. I had to reconcile the original draft and Mr Mukherjee’s draft and brought out a third draft which I think is better than the second draft but not entirely satisfactory. Anyway, there are three drafts; let the government take any draft and work on it. But DTC is absolutely important.
Q. On farmer suicides, what is the way forward to alleviate their problems?
The problems of farmers are myriad. There is no one solution to the problem. The government owes an obligation to address the issues of farmers as and when they arise. It could be drought, unseasonal rains, decline in wholesale prices, indebtedness or interest rates.
Farmers understand that these issues won’t go away overnight. What they want is support. The feeling of the farmers today is that this government has no empathy for them. This government is biased in favour of the corporate [sector] and there are not enough voices within the BJP that are being heard by the leadership, which is why some are driven to suicides.
Also there is the social environment. Farmer suicides are mainly reported in Maharashtra, Andhra Pradesh, parts of Karnataka, now Rajasthan and isolated parts of Gujarat. You don’t get frequent reports of farmer suicides in West Bengal, Tamil Nadu or Kerala. I think state governments also have a duty to create a social environment that supports farmers.
Q. Is this government anti-poor and pro-rich?
This government has no empathy for the poor. Its body language, verbal language and style of functioning are clearly pro-corporate.