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When Prime Minister Manmohan Singh
met with the senior officials from North Block earlier this week
after taking charge of the finance ministry again, his speech was
short and to the point. But the message that went out was loud and
clear with an added but important acceptance for the first time -
that there was indeed a widespread public perception of policy
paralysis in the government and he wanted the situation to change
as fast as possible.
In barely a few days since then, there is buzz all around that
with Pranab Mukherjee now pursuing a career outside real politics
as a candidate for presidential polls, Manmohan Singh has finally
stepped in with the same vigour that saw him unfold India's
liberal economic reforms programme in 1991, when he first became
finance minister.
According to insiders, the prime minister in ways more than one
was not particularly happy with the way the finance ministry was
being run under Mukherjee. There was also this mismatch in terms
of a liberal versus a conservative. But there was little he could
do as long as Mukherjee was in the saddle.
For example, Manmohan Singh is said to have taken particularly
exception to the way the tax case was being pursued against
Vodafone with a retrospective change in statute, despite a Supreme
Court ruling in favour of the Britain-based mobile telecom giant.
The prime minister was all the more sore, since he had assured his
then British counterpart Gordon Brown in a letter last year that
the Vodafone will not be singled out.
"But he could not say much. There was this issue of seniority,
respect, his own persona - in fact, several other factors that are
hard to explain," said a former aide to the prime minister, who
did not wish to be quoted, explaining the equation with Mukherjee.
The former aide said there was always this lingering fact:
Mukherjee as Finance minister in the late 1980s had appointed
Manmohan Singh governor of the Reserve Bank of India.
But that is a matter of the past -- as evident from the prime
minister's short speech June 27 before the economic advisors and
secretaries to the finance ministry. It gave away how much he
disapproved the extant policies. Also, by saying he had been away
from the nitty-gritty of the ministry for a long time and that he
wanted proper feedback now from the ministry official, the prime
minister also sent a signal that he intended to retain the
portfolio for some time at least.
"In the short run, we need to revive investor sentiment both
domestic and international. There have been many factors that have
contributed to this general negative mood," he said in a rather
frank and honest admission which recognised the fact that the
investor mood both within and outside the country was not really
positive.
"At the current juncture, we are passing through challenging times
economically. The growth rate has taken a dip, the industrial
performance is not satisfactory, things are not rosy on the
investment front, inflation continues to be a problem. On the
external front, I am concerned about the way the exchange rate is
going. Investor sentiment is down and capital flows are drying
up," he said.
"Revive the animal spirit in the country's economy," he told the
officials, drawing from one of his most-liked phrases penned in
John Maynard Keynes' book, "The General Theory of Employment,
Interest and Money" that describes it as an emotion that
influences human behaviour into spontaneous action.
These candid remarks were enough to once again rekindle hopes
within India Inc that economic reforms will be back on track,
especially since "Team Manmohan" of 1991 was back on the saddle.
Prominent members of this team then were Reserve Bank of India
governor C. Rangarajan and finance secretary Montek Singh
Ahluwalia, among others. They are back advising the prime minister
as chairman of the Prime Minister's Economic Advisory Council and
deputy chairman of the Planning Commission, respectively.
To assess the mood after Manmohan Singh took charge of the finance
portfolio, the Associated Chamber of Commerce and Industry of
India (Assocham) commissioned a survey a few days ago among top
150 industrialists in the country. The findings corroborated the
overall change of mood. The survey found that 80 percent of the
chief executives firmly believed that the prime minister will now
act quickly and pursue reforms in areas like retail trade,
aviation, insurance, banking and pension without further
indecisiveness.
The markets, too, raised a toast. The sensitive index (Sensex) of
the Bombay Stock Exchange (BSE) rose some 500 points since
Manmohan Singh took charge of the finance ministry and is ruling
at a two-month high.
But next few weeks will be crucial for they will determine how
fast he is acting and delivering on policy front. Otherwise the
same Sensex will not blink an eyelid to crash again, and give
rating agencies fodder for a negative assessment of the economy
again.
(Arvind
Padmanabhan can be reached at arvind.p@ians.in)
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