What worked for the P V Narasimha Rao government in the early 1990s was not just an active Prime Minister’s Office, or PMO, headed at the secretariat level by Principal Secretary Amar Nath Varma, but also a fairly stable and effective top team at the finance ministry in North Block. This fact is often ignored while evaluating how and why the Narasimha Rao government did so well in taking the reforms agenda forward — and why the performance of the Manmohan Singh government, on the reforms front, has declined precipitously in the last few years.
There is no doubt that Mr Varma gave the PMO in the early 1990s the kind of purposeful and decisive leadership that few of his successors could claim for their respective governments in the following two decades. If the Rao government managed to implement a series of landmark reformist decisions in the first three years after the crisis of 1991, then the impetus for that drive came from the PMO under Mr Varma. But could the PMO under P V Narasimha Rao have succeeded as well as it did if it had not enjoyed the support of a stable and efficient top team of secretaries in the finance ministry, ably led by Manmohan Singh as finance minister?
One of Manmohan Singh’s biggest achievements as finance minister was the way he put together a team of senior secretaries in the finance ministry to implement his reforms. Dr Singh began tentatively, but soon left no one in doubt as to who he wanted as part of his key team. For instance, Montek Singh Ahluwalia took some months to be shifted from the commerce ministry to the finance ministry. Remember that Dr Singh’s first Budget was presented with a team that he would never declare as his own — his finance secretary was S P Shukla and his chief economic advisor was Deepak Nayyar. Mr Ahluwalia joined the finance ministry, initially, as secretary in the economic affairs department. It was only after K P Geethakrishnan (who used to be the finance secretary in charge of the revenue department) moved to the International Monetary Fund that Mr Ahluwalia became finance secretary and led a team of other able secretaries under Manmohan Singh as finance minister.
What distinguished the relationship between the finance ministry and the PMO in those days was a unified vision for economic policies. There could be minor differences of opinion on the sequencing of certain decisions, but on the overall thrust of economic policy-making there was complete unanimity of views. Even when differences between the PMO and the finance ministry would arise (for instance, over the question of slashing fertiliser subsidies), those would be resolved through follow-up consultation and adoption of alternative plans of action. There may have been areas of conflict, but there was no collision. And this was possible because the PMO and the top team at the finance ministry worked together, stayed in touch with each other on key issues and shared a common vision.
There was yet another characteristic that defined the relationship between the PMO and the finance ministry in those days. The PMO had conceded to the finance ministry the key role of a coordinating agency on all key economic policy matters. The finance ministry would, thus, become the lynchpin for driving reforms in areas that did not always fall under its purview. But since it pertained to the question of pushing ahead with reforms, the finance ministry became the nodal agency for initiating the necessary moves.
Seen from this perspective, the relationship between the PMO and the finance ministry in the last three years, in particular, appeared significantly different. Initially, the PMO did not have strong leadership at the secretariat level. And when it did have a new principal secretary in Pulok Chaterji, who took charge of the situation, the finance ministry was not always seen to be playing ball. The equation between senior officials in the finance ministry and those in the PMO was nowhere near the level that prevailed in the early 1990s. The finance ministry officials would operate within the parameters set by their minister. Nor would the finance ministry try to emerge as the coordinating agency for economic policy-making within the government. Indeed, that role would be played by no ministry, not even by the PMO. This could also be an unfortunate fallout of the political equations between the prime minister and his finance minister.
Things may have begun to change in the last few weeks, now that the Indian economy is facing a major crisis. The finance ministry appears to have shrugged off its earlier lethargy. The calibre of the teams now and then is not comparable, but there appears to be closer interaction among senior officials of the PMO and the finance ministry. The finance ministry has almost reclaimed its earlier role of being the coordinating agency for all major economic policy-making. If it is a question of providing a bailout package for seven state power distribution companies, it is the finance ministry that puts together its key elements, of course in consultation with the power ministry. But it is the finance ministry that is taking the lead. These may be early signs, but a closer interaction between the PMO and the finance ministry certainly augurs well for the country’s economic administration.
