| All this at the Delhi School of Economics (DSE) between 1969 and 1971 while he pursued a masters in Economics. |
| Parthasarathi Shome, appointed as advisor to Finance Minister P Chidambaram, will be no stranger in his new work environment. Lahiri as the chief economic advisor in the finance ministry will be a source of strength while Shome takes on the new challenges. |
| Both are from Presidency College, Kolkata, and both of them today enjoy the rank of a secretary to the government of India. And Manmohan Singh as the prime minister will always be there to guide his old student. |
| Shome's friends during college and DSE days have faint memories of him as a student. As a graduate he topped the Calcutta University in Economics and stood fourth in DSE two years later. |
| "He was a quiet boy, but likeable and well-liked by almost everybody," says an economist who studied with Shome in DSE. Unlike some flamboyant fellow students, Shome would raise only relevant questions in the class room, move across to the Ratan Tata Library immediately after classes and walk back to the International Students House hostel on Mall Road, where he stayed, at the end of the day. |
| No yapping, no cracking of jokes or hanging around the coffee house after classes. Shome was the quintessential good boy of the School. |
| That quality has, however, stood him in good stead in the succeeding years of his career. |
| He has been associated with several world-class research and academic institutions including the Institute of Economic Growth; the National Institute of Public Finance and Policy; the Institute of Economic Research; Hitotsubashi University, Tokyo; the Institute of Developing Economies, Tokyo; the Indian Council of Research on International Economic Relations; and the Singapore-based Regional Training Institute of the International Monetary Fund (IMF). And finally, he reached the Holy Grail of all Indian economists, the IMF in Washington. |
| In between, Shome's contribution to public finance policy debates in India has been no less significant. |
| He came to prominence with his May 2001 report on the road map for changes in direct and indirect taxes. The biggest challenge for Shome in his stint as advisor to the finance minister will be to reconcile what he believed and outlined in his 2001 report with what his immediate predecessor, Vijay Kelkar, recommended while heading the task force on the implementation of the Fiscal Responsibility and Budget Management Act. |
| There are some crucial differences between the two approaches. Shome believed that the state-level value added tax (VAT) could co-exist with the central VAT, while Kelkar suggested a single rate of 8 per cent VAT. |
| Similarly, Shome was more of a pragmatic while suggesting a more staggered cut in customs duty than the steep cuts recommended by Kelkar. |
| Shome recommended the abolition of savings incentives in phases in addition to the withdrawal of incentives for housing loans. Kelkar had a different view. |
| There is little doubt that Shome's appointment as the FM's advisor will result in perceptible shifts in the government's taxation policy. |
| A strong proponent of the service tax, Shome believes that the rapidly growing services sector has not been fully covered by the tax net. So, expect further widening of the service tax net in the next Budget. Shome is also a votary of decentralisation, which he believes leads to higher economic growth and lower fiscal deficit of states. In his view, therefore, states should be given more power to undertake their own taxation to enhance their autonomy. |
| What is more interesting, Shome believes that poorer states should be protected and there is need to reverse the recent trend of laying reduced emphasis on poverty as a criterion for redistribution of resources among states. |
| The big question is: How successful will Shome be in implementing this politically sensitive aspect of his public finance policy thrust? |
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