When Finance Minister Pranab Mukherjee moved from South Block to North Block in May 2009, he had a familiar task at hand.
After a gap of 25 years, he was back at the finance ministry, this time amid a globalised economy, against the ‘licence raj’ in his previous stint during 1982-1985. He now had to deal with an economy reeling under the global economic slowdown. And, India could no longer be entirely de-coupled from the globalised world.
P Chidambaram, the finance minister during the majority of the United Progressive Alliance (UPA)’s first term, was moved to the home ministry in the wake of the Mumbai terror attacks. Mukherjee was brought in to revive the sagging economy — growth had sagged to 6.7 per cent in 2008-09 from nine per cent in the previous three years.
“All economic issues will be addressed... Various efforts will be made to insulate the Indian economy from the adverse impact of the financial meltdown,” Mukherjee had said after taking charge. The economy did respond to a series of stimuli by the government — tax cuts and enhanced public expenditure. It expanded 8.4 per cent in 2009-10 and 2010-11. The optimism to raise this to nine per cent in 2011-12, however, proved to be short-lived, as growth plummeted to 6.5 per cent in 2011-12, a little lower than that seen during the 2008-09 crisis. (Click for chart)
In the last three years, the seasoned politician has not delivered as much as he had promised. Despite the persistently high inflation and declining growth in 2010-11, Mukherjee offered bagfuls of promises in the subsequent Budgets. However, the disinvestment, tax collections, fiscal deficit, borrowings and growth figures fell way short of his targets.
Also, the finance minister did not see significant progress on two tax reforms that were much talked about—the Direct Taxes Code (DTC) and the Goods and Services Tax (GST). The DTC, earlier scheduled to be introduced from April 2011, would now come into effect from April 2013. After assuming charge, he had made known his intention to introduce the GST in 2010. However, till date, there is no clarity on when this would see the light of day.
Mukherjee could have turned his second stint in the finance ministry into one when major reforms were carried out. Unfortunately, this came amid a different political set-up. Unlike in the Indira Gandhi government, he was now not finance minister of the Congress government alone, but of the coalition UPA regime. The government struggled to see eye-to-eye with the Opposition, as well as some of its allies, on crucial policy issues. Proposals to allow foreign investment in sectors like multi-brand retail and pension couldn’t pass muster with Trinamool Congress, a crucial ally.
|What he could…
||What he couldn’t…
|Finalise Direct Taxes Code for its enactment in 2013, some proposals advanced
||Introduce Goods & Services Tax; missed two deadlines, no fresh deadline
|Introduce Negative List and General Anti-Avoidance Rules (yet to come into effect)
||Bring back the economy on high growth trajectory and control inflation
|Allow foreign investors in mutual funds, equities
||Direct transfer of cash subsidy for kerosene, LPG, fertiliser by March 2012
|Cabinet nod for increasing voting rights of shareholders in Banking Bill
||FDI in pension, higher FDI in insurance, guidelines for new bank licences
|73,000 villages banked by March 2012
||Decontrol of diesel prices and reduce subsidies
On some fronts, Mukherjee achieved partial success. The Negative List for taxation of services, an important indirect tax reform required to usher in the GST regime, would come into effect next month. To tackle the issue of black money, he announced significant amendments to the Income Tax Act. However, instead of winning him accolades, the move was criticised by the industry and investors. Retrospective amendments to the Income Tax Act, aimed at taxing the Vodafone deal, also became a controversial issue.
|INDIA INC LAUDS UPA CHOICE
|“Pranab babu has been the pillar of strength for the Congress and without him the government will not be the same. The Congress will certainly miss him in the government. I wish him all the best at the highest office of the country”
CMD, JSW Steel
|“Pranab babu is one of the senior most leaders of our country. He has a wealth of knowledge and experiece. As someone from Bengal, I feel very proud”
Chairman, RP Sanjiv Goenka Group
|“Pranab Mukherjee — Superb choice for President. A perfect blend of stature, competence and experience”
Chairman of UB group and Kingfisher Airlines (On Twitter)
|“He is a good choice for the President. But the country will lose a great Finance Minister. It will be difficult to find a good candidate to replace him as Finance Minister”
CEO, Zensar Technologies
|“Pranab babu's elevation to the highest position in the land is a very well-deserved step. After a long career in successful politics, having dealt with all spheres of the government, this forms the climax of his career. We would like to extend our best wishes and prayers in the presidential elections”
S K Birla
Chairman emeritus, Digjam
Mukherjee may have drawn flak for his various taxation proposals, as well as for not steering the economy well enough to face the onslaught of external headwinds, but time and again, he made it clear he would not be influenced by narrow regional mindsets. His statement that he was finance minister of the federal government, not of West Bengal (in reference to Mamata Banerjee's demand for a package for the state), infuriated the Trinamool Congress chief, leading to her trying hard to scuttle his chances of assuming the highest constitutional office in the country.
Interestingly, Prime Minister Manmohan Singh was governor of the Reserve Bank of India during Mukerjee’s earlier stint as finance minister. If Mukherjee does become president, in a constitutional sense, he would again acquire a higher status than Singh’s.