Former Finance Minister Arun Jaitley left a lasting imprint on the economy as structural reforms taken under his watch will have wide-ranging impact in the years to come.
Apart from a series of measures to enhance the productivity of the Indian economy, he was instrumental in bringing political consensus for a marathon legislative process and subsequent implementation of the Goods and Services Tax (GST) — an indirect tax reform aimed at promoting seamless trade across the country. Building the political consensus for the GST, both at the national level and among all states is perhaps the most significant task that Jaitley managed to achieve.
Several decisions, including legislative drafting, rules drafting, notifications, fixing initial rates and rationalising rates under GST were taken under his chairmanship of the GST Council, without undertaking voting. “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.
Besides being the finance minister, he also served in a variety of ministerial posts in the BJP-led National Democratic Alliance (NDA) between 1999 and 2004, including 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 as Minister of Commerce & Industry and Law & Justice.
As Commerce Minister, Jaitley had unveiled the export-import (exim) policy emphasising on the importance of service 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”.
In his role as Finance Minister, as a mountain of stressed assets made the banking sector moribund, he moved to get the Insolvency and Bankruptcy Code (IBC) enacted — a much required legislation which pushed banks to pursue recovery of bad loans of more than Rs 10 lakh crore in a time bound manner. Timely capital infusion in public sector banks and merger of weak banks with strong banks ensured that state-owned banks came 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 kicked in till March 31, 2019, the IBC yielded successful resolution plans in 93 cases, wherein financial creditors could recovery Rs 74,497 crore out of admitted claims of Rs 1,73,359 crore — resulting in 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 to record lows, his budget proposals over the course of 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 RBI over the issue of the central bank’s surplus reserves and many other issues was another blip during his tenure.
Jaitley was Modi’s go to man and a key strategist on economic policy and legal issues. Starting with the Union Budget 2014-15, Jaitley significantly eased foreign direct investment norms for defence, insurance, housing and manufacturing sectors, while budget for 2017-18 announced abolition of the Foreign Investment Promotion Board, the body that cleared foreign direct investment plans up to Rs 5,000 crore. Union Budget 2015-16, announced creation 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 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 the 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.