Most people may have forgotten that, back in 2004, Manmohan Singh as the newly-appointed prime minister had let it be known that he would retain the finance portfolio for himself. In the event, he was persuaded that this would be a bad idea. The logic reportedly proffered was that he should be focusing on his new job, not his last one. So P Chidambaram got the perch he wanted in North Block. The start of the second term, 2009, was even more dramatic. According to one insider’s account, the prime minister’s choice as finance minister was C Rangarajan, who some months earlier had quit as chairman of the prime minister’s economic advisory council and been nominated to the Rajya Sabha. In fact, Rangarajan was asked to come to Delhi from Chennai, presumably to be sworn in, but was told at the last minute to cancel his trip. Three months later, he resigned his seat in the Rajya Sabha and went back to his earlier job as chairman of the prime minister’s economic advisory council. Suresh Tendulkar, who had been appointed chairman in between, was sent packing although he was a friend of the prime minister. What this history makes clear is that Dr Singh was always keen on doing the finance minister’s job himself, or getting another economist whom he trusts to do the job for him.
What is additionally clear now is that all those who focused on the perception gaps between the welfare-oriented policy preferences of Sonia Gandhi and Dr Singh’s more growth-oriented focus, missed another equally significant chasm: that between Dr Singh and Pranab Mukherjee. The uncharacteristic swiftness with which Dr Singh has moved after taking charge as the interim finance minister, and the speed with which he has set the ball rolling to reverse some of his predecessor’s more controversial actions, suggests that he must have been chafing at the bit all along, unable to direct or influence the finance ministry so long as Mr Mukherjee was in charge. Perhaps this is because Mr Mukherjee as finance minister had been Dr Singh’s boss in the 1980s, when the latter was appointed governor of the Reserve Bank in 1982. And given that Dr Singh is not the naturally assertive kind (look at how he allowed Andimuthu Raja to play with the rules), it is easy to see that Mr Mukherjee would have wrested at least as much ministerial autonomy as Mr Raja. And so, despite the change in reporting relationship since the 1980s, Dr Singh could not impose his will. After all, he had written to the British prime minister, promising there would be no retrospective tax imposed on Vodafone; and here was his finance minister doing exactly that!
Prime ministers have been finance ministers thrice before this, and never for purely fiscal reasons. Nehru took charge briefly after T T Krishnamachari resigned in the wake of a scandal in 1958. Indira Gandhi moved in after stripping Morarji Desai of the finance portfolio in a fight for political advantage, and used her socialist Budget (of 1970) to jack up tax rates to extortionate levels. Finally, in 1987, Rajiv shifted out V P Singh and put an end to the “raid raj” that Singh had launched on business houses. The question now is whether Manmohan Singh sees himself as a strictly interim finance minister, or whether he intends to keep the portfolio till 2014 and take direct charge of economic management in a way that he was dissuaded from doing in both 2004 and 2009. If the latter, the intriguing question is whether Ms Gandhi has chosen to give her prime minister more wiggle room because the economy is in a mess.