Economy Aug 1, 2012
Now that Palaniappan Chidambaram is back where he belongs - in the finance ministry - the big question is whether he can deliver what Pranab Mukherjee couldn't: sensible fiscal consolidation that does not crimp growth and which revives business confidence.
The answer to this question depends on two factors: his equation with Manmohan Singh, which in the past has been strained, especially in the wake of the 2G scam, and the level of political backing he will get from Sonia Gandhi.
Pranab Mukherjee's problem was that he was not on the same wavelength with both of them. Sonia didn't trust him fully even though she needed him for his political management skills. And Manmohan Singh had no say in how the finance ministry was run - since Pranab wanted to keep it that away. Despite being Pranab's boss as PM, Singh was handicapped by the fact that Pranab was his boss in the 1980s, when Singh was RBI Governor and Mukherjee the finance minister.
In the case of Chidambaram, as a former trusted colleague of Rajiv Gandhi, Sonia has greater faith in him that Pranab. Moreover, luck was on his side during UPA-1, when high growth and buoyant tax revenues allowed Chidambaram to finance all of Sonia's public spending wish-lists - from NREGA to farm loan waivers and petroleum subsidies.
Chidambaram's problem, though, related to Manmohan Singh. The two have not shared a comfortable relationship, given their completely different attitudes - one a picture of arrogant efficiency, and the other a unassertive personality with no stomach for argument or confrontation.
In 2004, Chidambaram was not Manmohan Singh's first choice for FM. In 2008, when 26/11 offered Manmohan his first opportunity to have someone competent to run the home ministry, he was happy to move Chidambaram - despite the latter's reluctance - when he could arguably have done better job in finance after the Lehman crisis.
Last year, relations between PM and Chidambaram could not but have worsened after it was discovered that a crucial post-mortem note emanating from Pranab Mukherjee's ministry (dated 25 March 2011) on the 2G spectrum scam was prompted by the Prime Minister's Office. The note effectively said that even through A Raja issued licences to 122 applicants, the allotment of spectrum at 2001 prices could have been stopped by Chidambaram if he had wanted it.
Apparently, the original note prepared by the department of economic affairs (DEA) had only 12 paras giving the "Chronology of basic facts related to pricing and allocation of 2G spectrum," but when the draft went to the PMO it came back with 32 paragraphs - with some of the additions pointing to Chidambaram's lapses.
Mukherjee, who suddenly found himself being accused of trying to frame Chidambaram, then put the record straight through another note which explained what happened. According to The Times of India, the new note said: "DEA was not in favour of sending the (25 March) note, after its finalisation through a formal OM (office memorandum). It was upon the insistence of the JS (joint secretary), PMO, through her phone calls to secretary, DEA, that the communication was sent through a formal OM on 25 March 2011."
Hopefully, this episode has now been given a decent burial.
But we don't know that. Even after Pranab Mukherjee's exit, the appointment of Chidambaram came after more than 40 days of deliberation at the party level. In fact, the PM moved with alacrity to get things moving in finance soon after Mukherjee bid goodbye. The general assumption was that he would get some things done and then induct a full-time FM.
However, the PM has done little more than appoint a few committees, and Chidambaram is back in his old job. Does this mean he was appointed despite Singh wanting control of the finance ministry, or because Singh has changed his mind on Chidambaram?
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