P Chidambaram begins his third round as finance minister with a change of guard. He has assembled about himself a crack squad of six economic executors and advisors. Much is expected of them, not least because the government finds itself under attack for its handling of the economy and deferral of reforms, and partly because the fiscal challenges are truly daunting. Vrishti Beniwal looks into the pedigree and fighting credentials of this new core team
Chief economic advisor
Rajan served as the youngest-ever chief economist of the International Monetary Fund. With a bachelor’s degree in technology from IIT Delhi, an MBA from IIM-Ahmedabad and a doctorate from the Massachusetts Institute of Technology, Rajan is currently a professor of finance at the University of Chicago. The Indian government’s trust in Rajan can be gauged from the fact that he is also serving as Honorary Economic Advisor to Prime Minister Manmohan Singh and chaired a high-level committee on financial sector reforms in India.
The author of Fault Lines: How Hidden Fractures Still Threaten the World Economy will assume charge as chief economic advisor at a juncture when the government, because of the upcoming general election in 2014, lacks a free hand to undertake reforms. Born in Bhopal, the 49-year-old is known for his candid talk, but it remains to be seen how he will express his views about the Indian economy after taking office.
His predecessor Kaushik Basu, who also expressed his views freely, often got into trouble for having done so. During his tenure Basu did not see the implementation of some of his ideas, in areas such as FDI in multi-brand retail, inflation control, and the partial decontrol of diesel.
Rajan’s true achievement will lie in coming up with proposals that can be implemented quickly. It is believed that Rajan enjoys the confidence of all top functionaries of the government, including the PM, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Chairman of the PM’s Economic Advisory Council C Rangarajan.
Some speculate that that Rajan will move to the Reserve Bank of India as Governor when D Subbarao retires in September 2013.
T he 1976-batch IAS officer from Madhya Pradesh has two master’s degrees — one in history from St Stephen’s College in Delhi and one in “social policy planning” from the London School of Economics.
Bose entered the limelight in 2000-2001 when, as a joint secretary in the Ministry of Human Resources Development, he launched the government’s ambitious universal education programme, the Sarva Shiksha Abhiyan. Bose also served as Secretary to the 13th Finance Commission, headed by Vijay Kelkar. After the commission submitted its report, Bose came to head the disinvestment department of the Ministry of Finance in February 2010. Here he was given the difficult task of raising Rs 40,000 crore through disinvestment of state-owned companies. But his task was made easier by the government’s windfall from the auction of 3G telecom spectrum; he raised Rs 23,000 crore from disinvestment.
Bose was made Expenditure Secretary in May 2011. His challenge was to keep expenditure under control, so that the fiscal deficit target of 4.6 per cent of GDP could be met. He did not succeed on either count, thanks to the government’s rising subsidy bill.
Bose’s colleagues say he is a fine officer of high integrity. Now, as revenue secretary, he has another chance to prove himself. Chidambaram has called for clarity in the tax laws and review of some areas. The agenda before Bose is to meet revenue targets, plug leakages, address concerns on black money, but at the same time protect the interests of domestic as well as foreign investors.
A big advantage for Bose is that his retirement comes only in March 2014, giving him a reasonable amount of time to work on all this.
RAMINDER SINGH GUJRAL
This soft-spoken 1976-batch IAS officer from the Haryana cadre got his first assignment in New Delhi as deputy secretary in the commerce ministry. He returned in 2007 as Director General of Foreign Trade. In late 2008, after the Western economies slowed down, it was Gujral who was asked to come up with a stimulus for exporters. Exports increased by 28 per cent in 2008-09, but in 2009-10 the growth fell to 0.57 per cent.
In July 2011, Gujral was handpicked by then-finance minister Pranab Mukherjee to head the revenue department. There were two other secretaries, Sumit Bose and R Gopalan, in the running for the most coveted assignment in the finance ministry — but the job went to Gujral.
His appointment came at a time when the finance ministry was going through a cash crunch due to a higher refunds outgo in the first two months of 2011, and to muted revenue collections. Faced with the enormous task of meeting over-optimistic Budget targets and tackling the issue of black money, Gujral (with Mukherjee’s blessings) came up with certain tax proposals in the 2012-13 Budget to address the issues of retrospective taxation and the General Anti-avoidance Rules (GAAR). But it backfired. Investors saw the steps as counter-liberalism.
Although Chidambaram has given no reason for moving Gujral from the revenue department, it is widely believed that he was held responsible for the deterioration in investor sentiment.
Now, as expenditure secretary, Gujral’s first priority will be to ensure that the fiscal deficit is not allowed to balloon further; or India risks a ratings downgrade. However, he won’t be able to do much here, as controlling the fiscal deficit depends on such matters as diesel decontrol, which are politically sensitive. What Gujral may also have to do is to rework some of the numbers to make them more realistic in the current economic situation.
Due to retire in November 2013, Gujral is considered sharp and manages to stay calm and composed in every situation.
POONAM KISHORE SAXENA
The 1975-batch IRS officer is replacing Laxman Das as chairperson of the Central Board of Direct Taxes. At least for now, her area of work is likely to get more attention from the finance minister, who has replaced his revenue secretary and wants to address the concerns of investors with regard to retrospective amendment of the Income Tax Act and GAAR.
Saxena’s colleagues say she is good at streamlining processes and ensuring timely submission. Due to retire in May 2013, Saxena has less than one year to execute things but, since she is known for taking quick and bold decisions, the department has high expectations of her.
She will also have to ensure that the direct tax collection target is met and that tax refunds are staggered during the year so the government does not face a cash crunch like it did last year.
Industry and investors expect Saxena to provide much-needed clarity in the tax laws. She and Chidambaram will have to take a crucial decision on the introduction of the Direct Taxes Code Bill in Parliament. The Bill, originally drafted under Chidambaram, underwent significant changes under the previous finance minister.
This 1976-batch Indian Revenue Services officer is the first woman to head the Central Board of Excise & Customs. She took charge from S K Goel earlier this month.
People who have worked with Mahajan or observed her work closely say she is target-oriented and knows how to get things done. Her top priority now will be to make sure that indirect tax collections, especially customs and excise, do not fall short of the target this year as happened last year.
The introduction of the Goods and Services Tax (GST) and smooth implementation of the Negative List for taxation of services are the key challenges before her. On the GST, she will have to ensure that the information technology platform GST-N is rolled out at the earliest and that the Centre is fully prepared to roll out GST the moment a consensus with states emerges.
As part of that task Mahajan, along with the finance minister, will have to decide on the vexed issue of giving Central Sales Tax compensation to the states. A package was approved by Mukherjee but it will need fresh approval from Chidambaram, considering its effect on the fiscal deficit.
secretary, department of economic affairs
Arvind Mayaram and his boss Chidambaram have a few things in common: both are in their third innings in the Ministry of Finance. Mayaram has served twice in the Department of Economic Affairs (DEA). Before assuming charge as DEA Secretary, Mayaram was Special Secretary and Financial Advisor in the Ministry of Rural Development.
He is widely credited for his initiatives in public-private partnerships (PPPs). While he launched PPPs for infrastructure in rural areas in the Ministry of Rural Development, in the Ministry of Finance he was instrumental in establishing the framework for PPPs. With his rich experience in infrastructure financing, Mayaram will play a key role in pushing Chidambaram’s agenda of rapid infrastructure development.
As DEA Secretary he will also be responsible for the revival of capital markets, boosting investment in the country and, above all, for coming up with a Budget next year that will balance economic and political compulsions in the run-up to the 2014 elections. This 1978 batch IAS officer from the Rajasthan cadre is due to retire in October 2015, giving him enough time to formulate and execute policies.