A few months before his tenure was to end in 1989, then finance secretary S Venkitaramanan wrote to the finance minister and to the Prime Minister’s Office during the Rajiv Gandhi-led Congress government’s term. The economy was in a mess, with fiscal deficit well over 8 per cent, and there was plenty of strain on the balance of payments front.
Venkitaramanan’s advice essentially was that the economy was vulnerable and therefore, the political leadership ought to consider approaching multi-lateral lenders such as the International Monetary Fund for assistance or a loan. His contention then, according to colleagues of that era, was that India had enough goodwill to ensure multi-lateral assistance without stiff conditionalities.
Any attempt to seek a loan would certainly have created a political uproar those days, given the ‘sell-out-of-national-interests’ perception attached to such assistance and the conditions which lenders such as the IMF imposed on borrowers. The PMO response to Venkitaramanan’s note was that there was no need to make an approach then. A little later, Prime Minister Rajiv Gandhi assigned Venkitaramanan and Vijay Kelkar — then with the Bureau of Industrial Costs and Prices (BICP), the forerunner to today’s Tariff Commission — to prepare an agenda for reforms. Even though the Congress government and Rajiv Gandhi had been weighed down by corruption charges on Bofors, they perhaps hoped that the party would retain power and some of the much-needed changes could be carried out later.
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By the time the committee completed its interim report, however, the Congress lost power in the 1989 elections. Venkitaramanan, who had finished his civil service career by 1990, moved on to Karnataka as an adviser to the Governor during President’s rule there, before taking over as the Governor of the Reserve Bank of India in December 1992 — an appointment that came on the back of Rajiv Gandhi’s support whose backing was critical for the survival of the then Chandra Shekhar government.
In the early part of 1991, up to April-May, when the crisis deepened — marked by Indian banks even being denied overnight borrowings from abroad, Non Resident Indians withdrawing deposits and a downgrade by global credit rating agencies — it wasn’t just Finance Minister Yashwant Sinha and his team in Delhi which was on the job. In Mumbai, at the RBI, Venkitaramanan began working on the phone with various central banks. The Bank for International Settlements or BIS — the central bank of central banks — wouldn’t help saying India wasn’t a member while many other central banks and global lenders weren’t willing to risk their money given the then experience of debt-ridden countries such as Mexico. That was when Venkitaramanan, after a mid-week discussion with his officials, got on the phone with his counterpart in the Bank of Japan and quickly fixed an appointment for Saturday. Within a day or two, the visa approval and other clearances were obtained from New Delhi and he managed to convince his fellow governor of the need to provide quick assistance along with another central bank which helped then — the Bank of England.
And when these banks wanted collateral or security in the form of physical gold, which had to be transported to UK, Venkitaramanan managed all of it, including getting the Indian customs not to insist on import clearances or licences for some of the boxes to transport the gold.
Time and decisive action were critical then, given the rapid depletion of India’s foreign exchange reserves, which by that time, at a little over $ 1 billion, was enough perhaps to cover just three weeks of imports.
And there was the secrecy of operations: the first tranche of the pledged gold (20 tonnes) helped raise $ 200 million as India went to polls in May 1991 after the tragic assassination of Rajiv Gandhi. Another 47 tonnes of gold raised $ 400 million and subsequent measures by a new government led by Narasimha Rao marked an end to crisis management and fire fighting then.
As a crisis manager, Venkitaramanan was brilliant, according to many officials who worked with him during that period. Some though do say that his pro-growth and pro- industry or corporate stance also could have contributed to the build-up of the economic crisis in the mid to late 80’s which he himself had flagged. What they are referring to is the period from 1984 to 1988/89, when the government followed an expansionary policy, which boosted growth but led to the crisis. That was the period when Venkitaramanan was the finance secretary.
And where he lost his sheen was after the securities scam of 1992: there was much criticism and he had to go after a two-year term — one of the shortest in the last three decades. That aside, many of India’s top politicians, civil servants and economists of that era are unanimous in their opinion that he was perhaps one of the brightest civil servants that the country has seen. Back in Tamil Nadu, where he began his career, he promoted many of the corporations and institutions when he was just a deputy secretary — relatively low down in the pecking order. And that was innovative thinking to ensure that Central government funds were available for the state to spend!