The Seduction Of PC

Cabinet members and invitees were milling around, chatting, as they waited for President Shankar Dayal Sharma to arrive. Gujral was having an animated conversation in Punjabi with Welfare Minister Balwant Singh Ram-oowalia. When suddenly the hum of conversation changed perceptibly. Heads turned.

Palaniappan Chidambaram—PC to friends—had entered the hall. As he strode down the aisle between the rows of chairs designated for invitees, more than a dozen politicians stood up and shook hands with him. Gujral walked up and hugged him. For a few minutes, incredibly, the hall's entire attention was focused on an ex-finance minister rather than a new leader of the Indian Executive.

After the swearing-in, as everyone headed for tea and snacks in the next room, the prime minister's painter brother, Satish Gujral, hugged Chidambaram with spontaneous warmth. And Railway Minister Ram Vilas Paswan grabbed his hands and smilingly—but not flippantly—threatened: "Chidambaramji, aapko to hum nahin jaane denge (we will not let you go)." And the man himself? Stranded in one of the most peculiar situations he had ever faced—and many strange things have happened to Chidambaram in the course of his two decades in Parliament—for once, he did not seem to be on top of the situation. Was it embarrassment that flickered across his controlled features? Embarrassment at the over-the-top reception? Was it frustration? Frustration at having presented a wildly cheered Budget and now unable to take it to its logical conclusion—get it passed by Parliament and implement it? The man definitely looked uneasy.

Later in the day, both the Confederation of Indian Industry (CII) and the Associated Chambers of Commerce (Assocham) sent delegations to Gujral, pressing him to cajole the Tamil Maanila Congress (TMC)—and Chidambaram—back into the government fold. Jairam Ramesh, Chidambaram's hand-picked man in the Finance Ministry, who is down with chicken pox, sent in his resignation, but Gujral refused to accept it.

CHIDAMBARAM'S distinct unease, though, appeared to have almost vanished when the nextday Gujral turned to him in the Lok Sabha during his speech and said: "I implore you to come and take your rightful place." And a few hours later, at the CII's annual session, he basked in the hosannas captains of industry heaped on him. By then he knew with some certainty that the TMC would rejoin the government and looked visibly relaxed. Outgoing CII president Shekhar Dutta welcomed him with the hope that he would address them as finance minister soon. Responded Chidambaram: "I have come to deliver the valediction. Valediction is not benediction. I have not come to say goodbye." Every face in the hall lit up. And when the media stampeded after him as he stepped off the podium, it was back to his old super-confident self.

Why do people think he is indispensable to the Indian economy? Opined the Wall Street Journal: "The resignation of Mr Chidambaram would be a blow to investors, who regard him as the United Front's main free-market reformer. They also consider his TMC...a bulwark against socialists in the coalition wary of foreign investment, privatisation and opening state-run sectors to private competition." Renowned Columbia University economist Jagdish Bhagwati was quoted as warning that if Chidambaram goes, there would be a loss of credibility within and outside the country. India, he added, desperately needs technology and investments and, without that credibility, foreign investors would shy away or the cost of borrowing would rise.

That's a lot of importance to attach to one man. After all, isn't the Cabinet responsible for the Budget rather than one man? Could Manmohan Singh have started the reforms without strong backing from P.V. Narasimha Rao? (Indeed, it is fairly well-established now that it was Rao who pushed Manmohan into liberali-sation, and in the first three years, often made sure that he went further than he had initially intended to.) Couldn't H.D. Deve Gowda have forced Chidambaram to present a very different budget from the one that he presented on February 28?

But to industry—domestic and foreign—he is the public face of the liberalising Indian economy. The fact that he's been a part of the reforms process since 1991, first as commerce minister and then as finance minister, adds to the comfort level. "The market is anyway apprehensive about how long this government will last," says Vijay Advani, managing director, Templeton Asset Management Company. "More than anything else, Chidambaram's re-appointment will impart a sense of continuity to the economic policies."

Also, given the complexity of the task of managing the economy, any finance minister needs a reasonable length of time to be able to let economic policy translate into reality. As Rakesh Mohan, director-general of the National Council of Applied Economic Research, puts it, "the finance minister today has to know the capital markets, banking system, centre-state financial relations, relations of the finance ministry with the Planning Commission and so on. If there is a new incumbent every 10 months, it means starting from the learning point again. It's a wasteful exercise." This is inviolable logic. But in the extraordinary wooing of Chidambaram throughout his exile, it sometimes appeared that the issue was not of retaining the finance minister but of retaining Chidambaram. "It's not a question of whether anyone else will be able to do a proper job or not. The market will definitely feel most comfortable with Chidambaram," says Advani. "

In his '97-98 Budget, he catapulted reforms to a new level, sending out a message to the people and corporate India that the government trusts you, that with the widening of the tax base and better compliance, the revenues would be used for social development, literacy and health," says Jamshyd M. Godrej, man-aging director, Godrej & Boyce. Adds Mohan: "In the first budget he set an agenda and announced what he would do, in the second he was able to deliver most of what he had said. He's a performer."

Ratan Tata goes further. "He is a gentleman, easy to deal with, straightforward, transparent and progressive," says the chief of the Tata empire. The fact is that industrialists feel comfortable with Chidambaram. He is highly qualified, exudes intelligence, is honest, even greets people with a "Hi!" Naturally, many foreign investors, thinking of putting their money in a country which till now had been, however mistakenly, associated in their mind with nothing but the Taj Mahal, snake charmers and a Soviet-inspired command economy, feel greatly reassured when they see a Harvard alumnus at the helm of economic affairs. They are confident that there won't be any serious wavelength mismatch. "Chidambaram can hold his head high and tell the world that we have the people, resources and industry that merit investment and technology and he will be believed. He inspires confidence," says Dutta. "There aren't too many people who can function as external spokesmen for the country, Chidambaram is one of the best we have," agrees R.C. Bhargava, managing director, Maruti Udyog. His efficiency, of course, is not in doubt. "He has a great eye for detail and getting into the depth of economic matters, the kind of nitty-gritty most ministers would not waste time on. That gives him a greater analytical understanding important to do the job," says

Mohan. And as finance minister, he has also shown remarkable flexibility for a man who has till now been seen as rigid in his opinions. "He may have taken a little time to understand the ethos of Indian industry, but once he did, he was able to carry forward Manmohan Singh's ground-breaking work," says Godrej.

Adds Bhargava: "The budget is asmuch an act of economic balancing as of political jugglery. Chidambaram’sbudget was the handiwork of a mature politician. He accepted the coalitionparties’ expectations of increased outlays for welfare and social measures.Then, he had two options, raise tax rates or go for growth. He took a strongpolitical posture, beyond political partisanship—by reducing tax rates.Thereby he created the right psychological impact that the economy needed tomove on to a high-growth trajectory." An ex-president of CII agrees:"In political craft, he’s scored over Manmohan Singh, essentially abureaucrat in a political role who tended to be over-cautious. Only a politicianof Chidambaram’s vintage could take the gamble on buoyancy of resources."

That’s perhaps Chidambaram’s realstrength: he has been able to give a cluster of powerful and highly visibleinterest groups—Indian industry, the salaried and middle classes and foreigninvestors—a psychological comfort level that they have all to gain from thevirtuous circle he hopes to unleash with the Finance Act ’97. The most vocalsections of our society believe—and have successfully spread thatbelief—that in this time of political uncertainty, the indispensable anchor toeconomic sanity is P. Chidambaram. So what if the same people thought much thesame about his predecessor too?