Agame of musical chairs four months before Budget 2001? No, make that two months, because budget preparations virtually begin in December when memos from all economic sectors begin to swamp North Block and media offices. Why on earth then a top-level secretarial reshuffle at this time? Consider this: the finance ministry now has a new finance secretary, Ajit Kumar instead of P.G. Mankad; a new revenue secretary, S. Narayan; while economic affairs secretary Dr E.A.S. Sarma bows out; and a new joint secretary for budget. With chief economic advisor Dr Shankar Acharya moving on at year-end after a five-year tenure—to be replaced probably by Dr Rakesh Mohan—expenditure secretary C.M. Vasudev is the lone remaining member of the Budget 2000 team. And, of course, the finance minister himself.
Or is he? Wicked wags are ready to send him off too, alleging that he'd rather prefer his home constituency than having to face the flak for economic slowdown, yet seemingly powerless to bring about new reforms that require a consensus in the nda, something which only the Prime Minister's Office can achieve. One can almost sympathise with the gossips; it's easier to ascribe the extreme reluctance of the administration to take hard decisions and the go-slow on pending economic reforms to such wild guesses than logic or wisdom.
In the absence of any explanation on the government's part for a new-look finance ministry, the unofficial channels of information are overflowing. While most academics and media find this budget-eve reshuffle inexplicable, three possible reasons are being offered, all linked to reforms and quite kind to the government. First, the government wants to bring about hard-hitting changes and the old team had become too set in its ways and thinking to be convinced of them. That's a very good reason but then why did Sarma, who was spearheading the work on the Fiscal Responsibility Act, have to go?
The second reason sees the return of the "Mumbai-based big industrial house", which is reportedly unhappy with the existing finance team and therefore engineered their exit. The third is even wackier: the present team is supposed to have had irreconcilable differences with rbi governor Bimal Jalan.
Musical chairs is not new to Indian babudom. But post-reforms, such reshuffles, especially in the key economic ministries, break the continuity that is vital for them to pursue and impact the decision-making process in any area—not only domestic policy but also global issues like the wto or multilateral aid. Says Sarma: "In the past five years, all the senior bureaucrats have had an average tenure of about seven-eight months in a particular area. That begs the question: is the government serious about reforms at all?"
Especially since concrete economic evidence of industrial slowdown is here. Says economist Bibek Debroy: "Except for exports which seem to be doing well, it's now clear that all other economic activities have slowed down. We might still manage to clock a decent 6 per cent at year-end if this continues, but that would be only because of the services sector."
By now, there's a consensus on the symptoms of the slowdown as well as its causes. Capital goods production has declined significantly—growth was a negative 0.8 per cent in April-August, 2000—pulling industrial growth down to 5.3 per cent. The primary sector affected here, going by the cii's ascon survey, is the electrical equipment sector. Clearly, with all the sebs deep in red, and few power projects coming up, this industry is hurtling towards sickness.
There's more. Inflation is at 6 per cent, power generation is down, the oil import bill threatens to be Rs 81,000 crore even as non-oil imports have dipped, the stockmarkets are hovering at a poor 3700-plus points and punters' darlings like Infosys and Satyam are eroding in value, industry is crying wolf over its uncontrollable high costs and the resultant demand for cheap imports flooding the Indian markets post-wto. In fact, except for a 22 per cent growth recorded by exports, there is very little in the economy that encourages activities more interesting than floating rumours.
Add to it the piled-up jobs in the government's in-tray:
l As on October 31, 2000, says cii, 50 mega infrastructure projects are hanging fire. These comprise eight refinery projects of a total capacity of 47.5 million tonnes per annum (mtpa), six fertiliser projects, nine port projects, two highway projects for 13,000 km, seven petrochemical projects and 21 big power projects of a new capacity of over 2000 mw.
l Still pending are tough decisions on government pensions and downsizing, Sick Industrial Companies Act and bifr, 100 per cent foreign direct investment in housing, ssi dereservation (so far, only textiles are out of the ambit, even as the wto clock ticks away for April 1, 2001).
l Radical economic legislations like the Fiscal Responsibility Bill as well as the competition law (post abolition of the mrtp Act) and action on reports submitted recently by the Eradi Commission on insolvency, and the Geethakrishnan Commission on expenditure reforms. All these have been promised for the winter session. So are labour law changes like the Contract Labour Act, and the Industrial Disputes Act. All this would now be piloted by the new team. The cii has also been insisting on the Industries Act, formerly the idra, but according to Debroy, "except for a small section governing small-scale sector, the entire Act is irrelevant. A better option would be to dereserve the sector and scrap the Act."
Finance ministry sources aver that the promised legislations, especially the insolvency and expenditure reports, as well as the competition law, should come in the winter session but there are doubts about the Fiscal Responsibility Bill. Especially since by insisting on transparency, Sarma has queered the pitch. Says Sarma: "The budget works a great deal on projections. For instance, if we put Rs 40,000 crore as revenue receipts, we put, say, Rs 40 crore as receivable from excise disputes. But then, the amount locked in could be Rs 4,000 crore, so why shouldn't we put the entire figure before the people? Similarly, sovereign guarantees for power projects are part of our liabilities, why shouldn't that be part of our deficit?"
It's a question that hangs uncertainly over the air thick with doubts over reforms.