‘India’s Finance Ministers’ by AK Bhattacharya: Steering Indian economy from Independence to ’77

Subir Roy

HOW Independent India’s finance ministers have helped shape its economic destiny, while themselves being buffeted by politics, is a story which is as important as it is long. AK Bhattacharya has embarked on the major exercise of telling this story and the first of the three volumes, covering the period between Independence and Emergency, is with us. By the time all the three are completed, it will turn out to be a magnum opus which will be an important addition to the literature on the economic history of Independent India.

The author’s journalistic career, spanning over four decades in some of the leading economic publications, has given him a unique ringside view of events and access to their dramatis personae. This has enabled him to put together the story of management of the Indian economy as few others would have.

The 30-year period (1947 to 1977) that the book covers has been divided into three main parts Nehru and his finance ministers, those under Shastri and Indira Gandhi, and Indira Gandhi as her own finance minister. While rendering the factual narrative of these periods, the book also addresses an overarching analytical issue the role of the finance minister in a developing economy. Plus, the whole story reveals what kind of an autonomy the finance minister of the day has had in being able to give shape to at least some of his own ideas. On this rests the need to examine individual roles of a set of the seniormost ministers who were not just rubber-stamping entities, but helped shape policy, of course under the overall authority of the prime minister of the day.

As the book makes it clear, though Nehru was a towering personality, the finance ministers he worked with like John Matthai, CD Deshmukh, TT Krishnamachari and Morarji Desai were no pygmies. “Each was a highly accomplished person in his respective field and well-regarded, be it in the world of politics or economics,” says Bhattacharya. Of these, Deshmukh and Desai could leave a personal imprint as they were at the helm for a sufficiently long period of time for half a decade.

Though Nehru was not known to be a particularly inflexible person, each of the finance ministers under him either quit in a huff or were made to resign under unusual circumstances. It is not as if Nehru and his finance ministers did not get along well. He and TT Krishnamachari shared a strong bond to the extent of him diluting the independence of the Reserve Bank of India and upping the clout of the finance ministry. This perhaps marked the beginning of the central bank’s autonomy being not much more than a token one.

As opposed to this, Nehru’s relations with Morarji Desai, a key finance minister of his, were always strained. Desai was not just a leader in his own right with a base, he was also personally quite inflexible. Despite many differences between them, Desai went on as finance minister for five years, offering a glimpse into the political culture of the time when leaders were tall enough to be able to live with differences and get along with the work at hand.

However, the tradition of tolerance ended rather early, from the time of Lal Bahadur Shastri, who was as mild mannered as he was firm. When TT Krishnamachari differed with Shastri on the issues of devaluation and economic reforms, he had to go. He was followed by the suave barrister Sachin Chaudhuri, who was as understanding as he was pliable. This enabled him to take responsibility for the devaluation of the rupee by a massive 57 per cent in 1966 without having much to say by way of his own views. So pliable was he that Indira Gandhi, who followed Shastri, retained Chaudhuri as finance minister.

Things were back to square one in 1967 when she won the elections and had Desai back as finance minister but only on his own terms as deputy prime minister. This unworkable arrangement ended in 1969 when Desai exited and Indira Gandhi became her own finance minister so as to be able to launch one of the most dramatic phases of economic policy-making. Fourteen private sector banks were nationalised and an era of state control over economic activities began.

She brought in YB Chavan in 1970 to be technically at the helm in North Block during one of the most stressful period of the country’s economic life, marked by the war with Pakistan and the massive influx of refugees from erstwhile East Pakistan. Then, in 1974, C Subramaniam came in to steer the economy through the years of the Emergency when budget-making was a huge challenge.

This record of how India’s economy looked and was shaped from the North Block through the first three decades after Independence is rich with archival details, livened with the liberal use of anecdotal matter. Historians will take a view on the historiography but for this reader, himself a scribe, the fun has been in discovering the rich stories that lie beneath the historic headlines an exercise which could have been far more anchored had there been an index to go by.