A K Bhattacharya: The return of the Singh Parivar

RAISINA HILL

It now looks reasonably certain that Manmohan Singh will start his second ministerial stint in the government amidst yet another crisis.

In June 1991, when he joined the government as finance minister, the Indian economy had been engulfed by an unprecedented fiscal and balance-of-payments crisis. That crisis was caused by continued neglect of the fisc by the previous governments and rapidly deteriorating foreign exchange reserves.

But Singh appeared unfazed by the problem. Even before he presented his first Budget in July 1991, he had taken a series of policy measures to halt the decline. The rupee was depreciated by 18 per cent in two stages.

The cash compensatory support system (another name for providing subsidy on exports) was abolished for all items, all industries barring eight sectors of security and strategic importance were thrown open to investment by the private sector and licensing was scrapped for all except 18 industries. The rest is history.

This time, the crisis has not been caused by the outgoing National Democratic Alliance (NDA) government. On the contrary, the NDA government had actually kept the economy in fine shape. Last week, the Sensex lost about 600 points.

Yesterday, the Bombay Stock Exchange's 30-scrip index lost another 565 points. And all because the leaders of the Left parties began making all kinds of impossible demands on the yet-to-be formed government at the Centre.

But Singh took little time in starting work on repairing the damage done by irresponsible statements made by various political leaders. Within half an hour of the market crash, he took four concrete steps.

One, he came out with a statement reiterating that the Congress was open to privatisation if that was in the national interest. Two, he assured everybody that his party would take care of the stock market with policies that ensured its growth. Three, he was involved with consultations with Finance Minister Jaswant Singh so that remedial steps were taken without delay.

And four, he ensured that financial institutions like the Unit Trust of India and the Life Insurance Corporation entered the market to give it support and that the Reserve Bank of India made available adequate liquidity to facilitate settlement of claims on the bourses.

The Sensex had lost close to 800 points before trading had come to a halt before noon. By the time trading closed yesterday, the index had made some gains and closed with a lower loss of 565 points.

This was yet another proof of Singh's ability as an economic administrator and the promptness with which he can react to a crisis, if he is given the right brief and freedom. Indeed, in the coming days, Singh will have a lot on his plate.

In the finance ministry, a lot of work will await him as the Budget for 2004-05 has to be presented before the end of July. Will he once again choose to present the first Budget of the new government in July? Bureaucrats in North Block say that completing the Budget exercise may not take long and the Budget can be presented even by the third week of June. But the final decision will rest with Singh.

The first Budget of the Congress-led government will be a keenly-awaited affair. It is a document that will put in perspective the track record of the NDA government in economic policy making in the last six years. And like the July 1991 Budget, the new Budget may set a new agenda for economic development and growth.

Thirteen years ago, the Indian economy needed a different kind of prescription. Today, the problems and challenges are entirely different. There is little doubt in anybody's mind that among all the politicians present today, Singh is the most suited to come out with a new agenda to meet those challenges.

What about the top team in North Block? Given the manner in which Singh deals with such issues, there will be no immediate bureaucratic changes in the finance ministry. In all probability, the first Budget of the Congress-led alliance would be presented with the help of Finance Secretary.

D C Gupta, Expenditure Secretary D Swarup and Chief Economic Advisor Ashok Lahiri. Revenue Secretary Vineeta Rao may be shifted as her next appointment as the head of the regulatory body for pension funds has already been announced.

North Block corridors are, of course, abuzz with talks of the return of Montek Singh Ahluwalia in the government. Ahluwalia, who currently heads the Independent Evaluation Office in the International Monetary Fund, was the finance secretary when Singh ran the finance ministry in the early 1990s.

The two enjoy an equation and understanding that can be used effectively by any government. The Singh-Ahluwalia duo during the 1990s had become so famous that they acquired the sobriquet of the "Singh Parivar" in the finance ministry.

Now that the Sangh Parivar is out of the government, there is intense speculation in the North Block over the return of the Singh Parivar.