Retired civil servants, who worked in the finance ministry in the early ‘90s when Manmohan Singh was at its helm, recall how careful and cautious Singh was in dealing with every file that came to him for his perusal. Even when he was not required to record his comments and the mandatory signature alone would have done, Singh would take pains to note how important that issue was and how all care should be taken to resolve it without undue delay. That habit saved Singh from further embarrassment during Harshad Mehta’s securities scam in 1992.
In almost all the notes that the then Chairman of the Securities and Exchange Board of India, G V Ramakrishna, would send to the finance ministry drawing attention to unusual movements and transactions in the stock market, Singh would write down his detailed comments on how quick remedial action should be taken. One may question whether merely noting on the files the requirement of quick remedial action against a likely scam was enough, or the finance minister of the day should have also ensured that those remedial actions were actually implemented to prevent the scam.
But there is no doubt that those notes on the file helped Singh immensely in defending himself during the investigation of the securities scam by the Joint Parliamentary Committee (JPC) headed by Ram Niwas Mirdha. The only paragraph that cast some doubts on Singh was when he was accused of having “slept” while the securities scam had fuelled the stock market boom. Singh had sent in his resignation letter after the JPC report became public, but his prime minister, P V Narasimha Rao, persuaded him to stay on, after stating in Parliament that his government had full faith in its finance minister.
That caution did not seem to have deserted Singh even when he became prime minister. There were reports that during the recent controversy over the allocation of licences and spectrum to telecom companies, the prime minister wanted his views on the issue to be informally shared with the telecom department and that the Prime Minister’s Office (PMO) should be kept at arm’s length. This was perhaps more than caution. It was a desire to stay out of any potential controversy. And this appeared to be once again on display last week within days of Singh’s taking additional charge of the finance ministry after Pranab Mukherjee stepped down to file his nomination to contest the presidential election.
According to some of those present at the first meeting the prime minister took with senior officials of the finance ministry last week, the government’s tax proposals figured prominently during the discussion. The prime minister was understood to have expressed his concern over tax policy issues. The issue of the General Anti-Avoidance Rules, or GAAR, also came up for the discussion. Finance Secretary R S Gujral explained to the prime minister how the proposed guidelines on GAAR were ready and various stakeholders including industry were consulted on the matter.
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The prime minister, it is learnt, was not satisfied with consultations with industry alone. He wanted a much wider dissemination, perhaps by posting the guidelines on the website, as indeed many sector regulators did with their draft consultation papers on major policies. Gujral, according to officials in North Block, did exactly that. He got the draft guidelines uploaded on the finance ministry’s website.
However, a statement the following day from the PMO on the draft GAAR guidelines posted on the finance ministry website created confusion. It was clarified that the prime minister had not seen the draft guidelines and they would be finalised only after his approval after taking into account the feedback the government received. What did this clarification mean? Was the prime minister just being cautious, like he has always been in his long career as a politician? His office was perhaps apprehensive that the draft GAAR guidelines might upset the investing community and it did not want the blame for this to fall on the prime minister.
Or was it the PMO’s way of telling the world that the draft GAAR guidelines that it saw was the handiwork of the previous finance minister and it should wait for the final guidelines after he reviewed them? It was certainly a definitive way of putting his stamp on a crucial tax policy matter.
So, it may not have been just caution that triggered the PMO’s clarification last Friday. It could have also emanated from the prime minister’s desire to make it explicit to the world that he was back in charge of the finance ministry. The draft GAAR guidelines, a product of the Pranab Mukherjee regime, are now out in the public domain. Without their being made available to all on the finance ministry website, the changes to be proposed by the prime minister would not have become easily evident. Indeed, when the prime minister sees the guidelines and finalises them after receiving feedback, everybody will know that these guidelines have come from the prime minister.
What better way of telling the nation that the prime minister has taken charge of the finance ministry! There are risks in this strategy. If things go wrong, the prime minister will have to take the blame. It seems he is now taking that risk.