Former Finance Minister Arun Jaitley has left a lasting imprint on the economy as the structural reforms taken under his watch will have a wide-ranging impact in the years to come. Apart from a series of measures to enhance productivity of the Indian corporate sector, he was instrumental in the implementation of the Goods and Services Tax (GST), an indirect tax reform aimed at promoting seamless trade across the country.
Building a political consensus for the GST at the national level, and navigating the sensitivities of a federal polity by getting all states on board through the GST Council is a legacy that Jaitley leaves behind. Several critical decisions, including legislative drafting, rules drafting, notifications, fixing initial rates and rationalising these under the GST, were taken under his chairmanship of the GST Council, without voting. Arun Jaitley funeral LIVE UPDATES
“The political noise outside is inconsistent with the harmony inside the Council,” Jaitley had written in one of his Facebook posts titled ‘Eighteen months of GST’ in December 2018.
He also served in a variety of ministerial posts in the BJP-led National Democratic Alliance (NDA) between 1999 and 2004, including as Minister of Law, Justice and Company Affairs, and Minister of Commerce and Industry. After the NDA lost power in the 2004 elections, Jaitley was appointed as the BJP’s general secretary.
In 2003, he was appointed Minister of Commerce & Industry and Law & Justice. As Commerce Minister, Jaitley unveiled the export-import (EXIM) policy, emphasising the importance of services exports and the need for speedier implementation of Special Economic Zones (SEZs) and identifying these as the engines of growth. Jaitley had said “the process of getting the zones ready should not have roadblocks”.
As Finance Minister in his first term after the BJP returned to power with a majority on its own, Jaitley moved to get the Insolvency and Bankruptcy Code (IBC) enacted when a mountain of stressed assets made the banking sector moribund. The IBC was a much-required legislation which pushed banks to pursue recovery of bad loans totaling Rs 10 lakh crore in a time-bound manner.
Timely capital infusion in public sector banks and merger of weak banks with the strong ones ensured that state-owned banks did not go belly up. The government also provided record capital infusion of more than Rs 2.1 lakh crore; much of it through an innovative route of recapitalisation bonds which enabled equity injection without disturbing fiscal deficit targets.
The IBC law has so far yielded a recovery rate of 43 per cent for the banks, much higher than in the earlier regimes. From December 1, 2016, when provisions of CIRP (Corporate Insolvency Resolution Process) kicked in, till March 31, 2019, the IBC yielded successful resolution plans in 93 cases, wherein financial creditors could recover Rs 74,497 crore out of admitted claims of Rs 1,73,359 crore – a recovery rate of 43 per cent for the financial creditors. In the existing regime of DRT/SARFAESI, banks could recover less than 20 per cent of the stuck loans with significant delays.
While demonetisation was a challenging policy disruption under his watch, which pulled down economic growth and attracted widespread criticism, his Budget proposals over the last five years unveiled measures aimed at attracting foreign investment, lowering corporate tax rate for MSMEs, introducing an ambitious National Health Protection Scheme (NHPS) and promising a minimum 50 per cent return over production cost to farmers.
A breakdown in relations with the Reserve Bank of India over the issue of the Central bank’s surplus reserves and many other issues was another blip during his tenure. Two RBI Governors, Raghuram Rajan and Urjit Patel, quit during his tenure, until finally the government chose the tried and tested formula of getting a bureaucrat on board.
Why he was the PM’s go-to man
Starting with the Union Budget 2014-15, Jaitley significantly eased foreign direct investment norms for defence, insurance, housing and manufacturing sectors, while Budget 2017-18 announced abolition of the Foreign Investment Promotion Board, the body that cleared FDI plans up to Rs 5,000 crore. In Budget 2015-16, he announced creation of a Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs 20,000 crore, and credit guarantee corpus of Rs 3,000 crore to refinance microfinance institutions through the Pradhan Mantri Mudra Yojana.
The showpiece of the 2018-19 Budget was an ambitious National Health Protection Scheme (NHPS) for over 10 crore poor and vulnerable families, an estimated 50 crore individual beneficiaries, with coverage of up to Rs 5 lakh per family per year. Among the steps to cleanse political funding, the government brought down anonymous or unnamed cash donations by individuals to political parties from Rs 20,000 to Rs 2,000, in line with the recommendation of the Election Commission. It also unveiled a scheme of electoral bonds for giving donations to political parties.