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economy
In 2013 Budget, he takes the aam admi test
himachal |
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economy Some of the budgets he has presented have been called ‘dream budgets’. He is credited with introducing the concept of service tax, which has now become one of the biggest revenue earners for the government, and the Rs 70,000-crore loan waiver package for farmers just before the 2009 General Election, which helped the UPA return to power. It is now 2012, and the picture is not so rosy. The economy faces the challenges of low growth, lack of investment, high fiscal deficit, weak policy action on reforms, downgrade threat from rating agencies, a deficient monsoon, global slowdown problems and a turbulent political environment. As Finance Minister, Chidambaram will also have to address the political mandate of the job. Next year’s budget will be the last one before the 2014 General Election, which is expected to be populist to keep up the ‘aam admi’ agenda of the UPA and the Congress. Ten states are also scheduled to go to the polls next year. Nikhil Vora of IDFC Securities says, “A spate of recent changes such as a new finance minister and economic adviser (Raghuram Rajan) has rekindled hopes of positive steps being taken by the government. Can the two deliver on expectations and lead India to being re-rated among global investors? They certainly have the track record.”
Underlying the importance of attracting more investment, both domestic and foreign, Chidambaram has stressed it is important to remove any apprehension or distrust in the minds of investors. “Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance to investors. We will take corrective measures wherever necessary,” he said. According to policy analyst Ramesh Adige, to mitigate the current account deficit, it is essential to shore up the rupee by attracting FDI. At least in the areas of insurance, pension, and aviation, where political sensitivity is less, the Finance Minister can push through reforms. “Further delay in announcing a policy on attracting FDI will be suicidal. We certainly cannot afford another downgrade by agencies, whether justified or not,” he adds.
A beginning Chidambaram has prodded market regulator SEBI to unveil reforms to boost mutual funds and primary markets. Another board meeting of SEBI is slated soon, where more stock market reforms may be announced. Boosting the sentiment in stock markets and soothing the nerves of FIIs spooked by retrospective taxation like GAAR will help to increase flows into the economy and generate an overall feel-good factor. He is also pushing banks to reduce EMIs on loans to stimulate consumer spending. That, and reviving the investment cycle, are the two things that will boost the entire economy, according to the Finance Minister. Some forward movement has been seen on insurance, with his ministry giving the go-ahead to raising FDI limit in the insurance sector to 49 per cent, from 26 per cent, which has been a major demand of foreign insurance companies. On the two important tax reforms, while Chidambaram is hopeful GST (Goods and Services Tax) will be in place by April 2013, he has remarked that the Direct Taxes Code will need a relook, possibly because it contains controversial proposals like GAAR, and the government wants to send a positive signal to foreign investors.
Obstacles no less The intention notwithstanding, consensus eludes FDI and other major reforms like GST. UPA constituent and Trinamool Congress chief Mamata Banerjee has rejected FDI in retail, insurance and pension sectors. The Land Acquisition Bill taken up by the Cabinet has been referred to a Group of Ministers as there were different opinions within the Cabinet. Citigroup was among the brokerages that recently cut the India GDP forecast. A Citigroup report observes the leadership change at the Finance Ministry is positive, but “actions may be less than words, given the continuation of the dual leadership model and all eyes on the next polls.” While the big-bang reforms may take time as consensus-building may be painstaking, if not elusive, the Finance Minister can move fast on administrative actions. After all, India was still growing at 8 per cent when there was no FDI in retail. Accelerating day-to-day decision-making is crucial, along with having a stable policy regime where investors know what to expect.
Industry cautious Nomura Securities observed in a research note: “Overall, we view the Finance Minister’s statements as positive and a promise that decision-making is set to accelerate. However, it is too early to rejoice. The government now has to walk the walk.” It added that certain decisions, such as cutting subsidies (by hiking fuel prices), lay at the heart of fiscal consolidation and required cooperation from all coalition partners. Cooperation, of course, remains the million-dollar variable.
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In 2013 Budget, he takes the aam admi test
FOR a government charged with ‘policy paralysis’, the bold move of Prime Minister Manmohan Singh to re-appoint P. Chidambaram as Finance Minister has sent a strong signal to the industry that his government is committed to removing the hurdles in the reforms process. Ever since Dr Manmohan Singh kicked off reforms in the country as Finance Minister in the P.V. Narasimha Rao government, aam admi’s interest in the Union Budget has soared. It is no longer limited to tax breaks or exemptions that common people look forward to, but enlarged to other spheres. In his first avatar as the Finance Minister during the HD Deve Gowda United Front government (1996-97), Chidambaram was hailed for having presented a ‘dream budget’ that included categorising the ‘Navratna’ grading of public sector undertakings and introducing a novel concept of not-so-hurting revenue generation through service tax — notwithstanding the controversial Voluntary Income Disclosure Scheme to mop-up unaccounted money. That year, Chidambaram had an unenviable assignment, presenting as he was a budget succeeding a trained economist in Manmohan Singh. Comparisons were inevitable, as was the task to continue the reform process under a government supported by the Left. Returning to the Finance Ministry for the second time in 2004 in the United Progressive Alliance government, Chidambaram had an equally daunting job of preparing a budget that lived up to the aspirations of people, industry and, of course, the Left that was providing crucial support to the coalition from the outside. And he performed admirably, even as he talked of the need to de-mystify the budget-making process.
Task master
Post-Mumbai terror attacks in 2008, Chidambaram was shifted to the Home Ministry. On his return last month, offices of the Finance Ministry suddenly started buzzing with intense activity. Known for his no-nonsense approach, Chidambaram leads from the front and keeps a punishing pace of work schedule that has the staff on the job from dawn to dusk. While the work culture is turning around once again, Chidambaram has a limited window of opportunity to do what he plans to put the economy back on track. Between now and the summer of 2014, the Finance Minister can present just two budgets, though for all practical purposes, the 2013 budget is the one in which he can introduce proposals that can be realistically converted into laws. The 2014 budget would be a vote-on-account allowing the government access to the Treasury till a new government takes charge. The options before the Finance Minister would be whether to present a populist budget with concessions, which the party and the ruling coalition expect, come up with proposals to attract greater investment in key sectors, including infrastructure, that could prove politically expensive, or strike a fine balance and tread the middle path. Whatever his choice, the time is limited. Will Chidambaram bring out his best, yet?
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himachal A political heavyweight and five-time Chief Minister, Virbhadra Singh has proved every time that he can be down, but never out. The ongoing political battle is the latest, but he has weathered such onslaughts in the past and has come out unscathed. Virbhadra has fought his political rivals within and outside the Congress on the strength of the tremendous sway he holds over the masses. In a democratic set-up, people are the decisive force and the wide support he enjoys has enabled him to successfully pursue politics with or without the support of the party high command. When he adopted a “rebellious” posture on the eve of the Assembly elections, the high command, which has been systematically ignoring him for the past four years, was forced to take notice and make him the state party chief. Apparently, the party cannot afford to take chances after the drubbing it received in neighbouring Punjab and its unimpressive performance in Uttarakhand. Over the past six months he demonstrated his strength to the high command more than once by celebrating his 50 years in politics and organising informal get-togethers which were attended by a majority of MLAs and former ministers. After the death of former Chief Minister Ram Lal and disappearance of senior leaders like Sukh Ram from the political scene, there is no other leader who can pose him a serious challenge.
Long innings The tiny state of Rampur Bushair became extinct long ago, but he carved out a bigger political territory by establishing himself as a popular leader. His royal descent and elite education have not come in the way of winning the support of the people. His long political innings have taken him to almost every village. He has trekked through difficult terrain over and over again since he made his electoral debut from the Mandi Lok Sabha seat in 1962. Years of toil have helped him establish a rapport with the people. The qualities of compassion and aggression, which he inherited as a “Raja”, have helped bolster his eventful career. He is benevolent while dealing with the poor, but unsparing, even ruthless, while taking on his political rivals and detractors. He has remained Chief Minister for over 16 years, more than any other leader of the state. He is often criticised for being “bountiful” to his loyalists and “unforgiving” to those who refused to toe his line. His fiercely combative attitude in confronting rivals and the ability to fight on several fronts simultaneously have enabled him to win many political battles. Age may have taken a toll on his physical being, but his fighting spirit is intact. He is at his aggressive best during adversity and somehow manages to have his way. He has been at the helm far too long and not only the BJP but also his own party leaders wanted to see his exit from the state politics. He was being marginalised ever since the Congress lost power in the state in 2007. He was carted out of the state politics in 2009 and made a minister at the Centre. His wife Pratibha Singh was denied party ticket from the Rohru seat, but the Congress lost the seat anyway. He received another setback when the election of his son Vikramaditya as president of the state Youth Congress was set aside and he was debarred from contesting. While his detractors were calling the shots in the party, Virbhadra was being targeted by the Dhumal government. He hit back with all his strength and bounced back yet again to occupy the centre stage. When the party lost power in 1990, he was even left out of the nine-member Congress Legislative Party. However, he fought his way to become the Chief Minister even though his rival Sukh Ram enjoyed the backing of the high command and the numbers also seemed to be on his side. A similar story was repeated during the 2003 Assembly elections when he outsmarted the then state Congress chief Vidya Stokes, a strong contender who enjoyed the blessings of the high command, and steered his way to the throne. This time he has managed to dislodge Kaul Singh ahead of the polls, but he still has a long way to go. Apart from ensuring victory of the party, he has to win the ongoing legal battle in the CD case to clear his name before vying for the top post for the sixth time.
Touch of vendetta He never bows out of the arena and every time the bout seems to be going against him, he suddenly delivers the knockout punch. At times, vendetta is discernible in his approach and political battles get reduced to settling personal scores. There is a long list of leaders like the late Thakur Ram Lal, Pandit Sukh Ram, Anand Sharma, Vidya Stokes and Vijay Singh Mankotia who have faced his wrath. He has ruffled far too many feathers and it is hardly surprising that he was being targeted by his own party leaders. He is obstinate, unyielding and goes all out to decimate his rivals politically. He allows political space to adversaries, which is rare, only if it fits in his larger game plan. A former minister and his bete noire, Vijay Singh Mankotia, who released the controversial audio CD, describes him as a leader with a “feudal mindset” who considers the state his fiefdom. Unlike leaders like Shanta Kumar and Vidya Stokes who do not react much to media reports, Virbhadra is hypersensitive to criticism and reacts sharply and spontaneously. He closely follows media reports and does not allow a single sentence or even a word, which does not conform to his point of view, go unchallenged. He not only takes notice of the contents but also the language, syntax and writing style and, more often than not, he can identify the writer even if there is no byline in the article. Particular about the use of words, he prefers to draft important press statements himself. This is another important area where he scores over his rivals.
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IT is his third innings as Finance Minister, and Palaniappan Chidambaram faces the tough task of reviving the Indian economy, which has faced a deluge of multiple challenges over the past two years. The Harvard-educated lawyer-turned-politician has been a veteran of North Block and was in the same position in UPA-I, when the economy was firing on all cylinders. 
Markets and industry have been enthused and reassured by Chidambaram’s appointment and are expecting action on the reforms front. Stocks are looking up and the rupee has stabilised in anticipation of concrete and credible steps to restore the economy. Chidambaram, who did not give any bytes on taking over, issued a detailed statement on the issues facing the economy exactly a week later. He unveiled a road map for reviving the economy with a dose of restoring investor confidence, fiscal consolidation, review of retrospective tax measures like GAAR (General Anti-Avoidance Rules) and steps to moderate inflation. A plan for fiscal consolidation will be announced shortly, and an expert committee has been appointed.
THE “Raja” of the erstwhile princely state of Rampur Bushair is back in the saddle. Virbhadra Singh has fought innumerable political battles, only to emerge stronger each time. The recent attempts of the Congress high command to sideline him have failed, forcing it to reluctantly give in to his demand of handing over the state party reins to him. Virbhadra is a force to reckon with and the Congress can’t seem to do without him.