WHAT does a finance minister do when his maiden Budget fails to impress, his proposals fail to warm up the investment climate and he's constrained by an anti-reform mindset within his own party? He talks tough, reshuffles his team and embarks upon a country-wide image makeover to show his best reform-oriented face to the people.
That's what Yashwant Sinha is doing these days. First, he gave a few very optimistic interviews and speeches, then he brought in the formidable reformer Vijay Laxman Kelkar as his finance secretary and ex-enforcement boss Jawed Chaudhary as his revenue secretary. And now, Sinha has embarked upon a series of roadshows throughout the country, to clarify that he and his party are as committed to reforms as his predecessors, if not more.
The exercise, which began last week with a series of meetings with the apex industrial chambers, will be carried on before people who matter in the economy—think tanks, economists, industrialists and opinion makers. The finance minister's agenda is well planned and will include Bangalore, Jaipur, Baroda and other important places apart from the four metros. The message is clear: the positive aspects of the Budget will soon bear fruit, and the worst is over for the economy.
But what may make the most impact on future reforms and the course the economy is going to take is the long overdue reshuffle in the Finance Ministry. The transfer of Montek Singh Ahluwalia, who had become synonymous with reforms along with Manmohan Singh in the hopeful Nineties, and of N.K. Singh, the flamboyant revenue-raiser, to use a cliche, marks the end of an era. Ahluwalia has the unprecedented distinction of being the finance secretary for the longest term of seven-and-a-half years, a feat which may remain singular for quite some time in the future.
His colleague, NK, who was expenditure secretary during the reforms, made his mark during P. Chidambaram's time with VDIS '97. The only person left from the earlier team is Shankar N. Acharya, who will continue to function as the government's chief economic advisor.
As expected, speculation has been rampant about the real reason behind the transfer of the two top men out of the hallowed chambers of North Block. Ranging from witch-hunting, personal political vendetta, to political pressure on the government by leaders of its allies. Chaudhary's appointment as revenue secretary, especially, is being looked at sceptically by political circles as he is the person, who, as Enforcement Director, had dared to send the first notice to AIADMK supremo Jayalalitha.
However, government watchers feel that with the cur rent reshuffle of secretaries in key economic ministries and the induction of bureaucrats with comparable, if not better, track records, the BJP government has made a bold statement indicating economic stability and continuity of reforms.
The BJP is confident that the new team will take the reforms—the future of which has been under a cloud for some time—to its logical end. Says a prominent BJP leader who is not in the government: "The reshuffle had been on the cards for quite some time. It had come up not due to any pressure from political circles, but to signal that the earlier phase of reforms is over. The new team, with people having well-known reformist credentials, will begin a bold and dynamic new era."
The brief given by the government to the incumbent bureaucrats is to carry on with the same reform agenda but at a much faster pace, as the pace of reforms has suffered due to political instability over the last two years. Says the BJP leader: "The overall direction and agenda of the reforms will remain the same, only the strategy this time will be different and more dynamic. The government has already indicated that the new economic strategy will begin from September, which will include disinvestment in public sector undertakings (PSUs)—a long-pending issue—inducing demand into the economy through sector-specific measures and overall fiscal management to bring the economy back on its rails."
The post-reshuffle Finance Ministry wears a totally different look. Apart from Kelkar and Chaudhary who assume office now, the new expenditure secretary E.A.S. Sharma had already taken charge of the department last month. The central board of excise and customs, too, will have a new chairman in S.D. Mohile who comes in from the central economic intelligence bureau. The new team is expected to be fully functional by the end of this month—just before the groundwork for the 1999-2000 Union Budget begins.
As criticism about the BJP's maiden Budget gained ground, BJP bigwigs have been complaining that the Budget proposals had not been thought through. Also, not enough time had been spent on preparing the Budget. And the lack of enthusiasm on the part of a few bureaucrats in the finance ministry was being cited as one of the reasons. Now that the BJP has its own men in place and well in advance, the government has set an ambitious target for next year's financial blueprint and expects to correct the shortcomings.
Vijay Kelkar, though not a trained economist like Ahluwalia, is perhaps the best qualified bureaucrat for the august office at North Block. Although not part of the economic think tank of the Narasimha Rao government, which ushered in the economic reforms in 1991, Kelkar has a good understanding of economics and price management. At the beginning of the economic reforms, Kelkar had been sent to UNCTAD in Geneva as director and coordinator in the international trade division. On his return, he was made secretary in the ministry of petroleum before being abruptly shifted as chairman, Tariff Commission, late last year.
Trained as an industrial engineer with a masters from University of Minnesota, Kelkar also holds a PhD in economics from University of California at Berkeley and an impressive teaching background. Kelkar was the main brain behind the oil and gas sector reforms, and his persistence was instrumental in bringing to an end the Jurassic administered pricing mechanism for petroleum products.
At the Tariff Commission, he worked in association with NCAER to outline tariff barriers and develop a model for future action in this area. Earlier, as chairman of the bureau of industrial costs & prices (1987-91), he laid the foundation for changes in the drug policy. The new finance secretary, who began his career as an instructor in micro-economics at California University, has extensive experience in economic ministries and has held key positions in the Planning Commission, Ministry of Commerce and the Economic Advisory Council.
Industry too is happy to have Kelkar at the helm of affairs in the Finance Ministry. Says Ajay Khanna, senior director in the Confederation of Indian Industry (CII): "Vijay Kelkar is the best thing that has happened to the Indian economy since Manmohan Singh. In the finance ministry, it is not important how India sees you, but how the world looks at you. And Kelkar with a vast experience abroad will need no such introduction."
The new revenue secretary, Jawed Chaudhary, also has a reformist reputation and was the latter's colleague in the Ministry of Petroleum when Kelkar spearheaded reforms there. Chaudhary comes to finance from the Department of Sugar where he was secretary. Preceding which, he was an establishment officer in the department of personnel and training, where he was presumably resting after his stint as enforcement director.
With a set of new brains, including economic advisor Mohan Guruswamy, the BJP's man from Harvard, the government seems to be extremely serious about putting the economy in order. The old team has the credit for kicking off the revolution, the incumbents are seasoned in the art of implementation. Except for the shadow of revolt within the coalition, the stage, as of now, is set for the second phase of reforms.