Financial Insights That Matter
Yashwant Sinha’s tenure as finance minister is remarkable, particularly because of the nature of the equation he had with his prime minister. Remember that Sinha first became the finance minister under the Chandra Shekhar government in November 1990. At that time, Sinha was a member of the Samajwadi Janata Party or Janata Dal (Socialist). He switched over to the Bharatiya Janata Party (BJP) in 1992. The choice of Sinha as the finance minister, just six years after joining the party, came as a surprise to many political observers within the BJP and outside. The first Vajpayee government, which lasted just sixteen days in 1996, had appointed Jaswant Singh as the finance minister. Sinha was a member of the BJP then but was not even among the eleven ministers who were part of Vajpayee’s council of ministers.
Indeed, Sinha’s elevation as the finance minister just two years later was a surprise even for him as well. After being sworn in as a minister and before the allocation of ministries, Sinha had approached Vajpayee to seek permission to visit Hazaribagh, the constituency that had elected him to the Twelfth Lok Sabha. An apparently amused Vajpayee had asked Sinha if he were to leave for Hazaribagh, who would prepare and present the Budget? That was Vajpayee’s way of informing Sinha that he would be the next finance minister. And that was also how Sinha learnt that Vajpayee would like him to steer the finance ministry. The style and manner in which the prime minister chose to tell Sinha about his decision also showed how the relationship between the two had remained a little uncertain and tentative.
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During his over four-year-long stint as the finance minister, there were many ups and downs in this relationship. Once, Sinha would even check with Vajpayee if he enjoyed his leader’s confidence and the prime minister would assure his finance minister that there was no lack of any trust or confidence. But that did not fully allay Sinha’s apprehensions. He would be troubled by charges from leaders from the Rashtriya Swayamsevak Sangh (RSS) that his Budget had departed from Swadeshi (nationalistic) economic policies. His decisions on expenditure management would face resistance from his own ministerial colleagues. Essentially, Sinha’s relationship with his prime minister was a factor behind the curtailment of his tenure as finance minister in 2002.
Once, after Sinha’s Budget faced major criticism from the RSS, he had even consulted Home Minister Lal Krishna Advani and expressed to him his desire to offer his resignation to Vajpayee. But Advani dissuaded him from quitting and Sinha stayed on as finance minister. Eventually, after Sinha’s 2002 Budget was seen to have many unpopular measures, Vajpayee decided to shift him out of the finance ministry. When Vajpayee insisted that Sinha should indicate an alternative ministry of his preference, to where he could be shifted, he mentioned the external affairs ministry. That is what precisely Vajpayee did. These developments confirmed yet again how Vajpayee’s relations with Sinha were not smooth and yet the prime minister would try to address his finance minister’s concerns.
The worst example of a near-inimical relationship between a prime minister and the finance minister was in the late 1960s when Prime Minister Indira Gandhi did not see eye to eye with Finance Minister Morarji Desai, on the question of bank nationalization. She had to remove him from that post before taking charge of that portfolio and nationalizing fourteen banks in July 1969.
In contrast, the Vajpayee-Sinha relationship was far less strained. Nevertheless, it also underlines how important a good equation between the prime minister and the finance minister needs to be, to ensure effective management of economic and fiscal policies for a government. That became evident when Vajpayee chose Jaswant Singh to succeed Sinha as the finance minister. The relative ease with which Singh could implement his decisions without any political hurdles or problems was an indication of the mutual trust and confidence the two enjoyed.
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The relationship between the prime minister and the finance minister underwent a significant change during the ten years of the United Progressive Alliance (UPA) government from 2004 to 2014. In 2004, Montek Singh Ahluwalia, who was at that time the director of the Independent Evaluation Office of the International Monetary Fund in Washington, was seen as Manmohan Singh’s first choice to be the finance minister. However, Ahluwalia’s candidature ran into some hurdles. For a few days, it seemed that the prime minister might keep the finance ministry under his additional charge, an idea that was eventually dropped. Singh’s final choice, P. Chidambaram, was accepted by the UPA’s political leadership.
Similarly, in 2009, after the general elections, Pranab Mukherjee became the finance minister as he was keen on that portfolio and UPA chairperson Sonia Gandhi made sure that Manmohan Singh allotted the finance ministry portfolio to Mukherjee. In both cases, the prime minister’s choice was vetted and approved by the UPA chairperson. The UPA government was different in the way it made its senior appointments. The prime minister did have a say in the appointment of ministers and senior functionaries in the government, but the concurrence of the UPA chairperson, Sonia Gandhi, was also necessary.
This meant a different kind of equation between the prime minister and the finance minister. The finance minister was not as beholden to the prime minister as previous finance ministers were. Even otherwise, Singh was a different kind of prime minister. He would allow his senior ministers to enjoy a lot of freedom and leeway in their decision-making, including even the appointment of key secretaries. Thus, both the finance ministers under UPA enjoyed more freedom than their predecessors under the Vajpayee government. There was no centralization of decision-making in the prime minister’s office and finance ministers under Manmohan Singh could plan policy initiatives with a freedom that many of their predecessors did not enjoy.
Excerpted from India’s Finance Ministers: Different Strokes (1998-2014) with permission from Penguin Random House India.
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