Tags:
Journalism of Courage
Is the finance minister going to be a failure this year? Many, from Kerala to Kashmir to Kathiawar, are worried that a spiritless finance minister, coupled with the dreaded foreign hand, shall take the Indian economy down the tube.
That is not a reflection on Jaswant Singh. Or, for that matter, on Yashwant Sinha. We all know the old saying that India8217;s true finance minister is not the politician of the day but the monsoon. The rains are so tardy this year as to draw comparisons with 1987, and after fourteen straight years of good monsoons, India8217;s luck may be running out.
However, to paraphrase a phrase commonly attributed to Mark Twain, while everyone talks about the weather there is nothing one can actually do about it. So, leaving the rain-clouds to the gods, the new finance minister should turn his attention elsewhere.
Let us begin with two premier financial institutions 8212; the Life Insurance Corporation and the Unit Trust of India, both without full-time chief executives. Silly at any time, this is dangerous behaviour just now.
The Unit Trust of India8217;s 20 million investors know the mutual fund is in a mess. They are not getting any returns. Worse, up to 35 per cent of their investment might have evaporated. Under the circumstances, one expected the finance ministry to give the best medical care.
Instead, ad hoc-ism rules the day. True, a competent IAS officer was appointed to lead the Unit Trust of India on July 15, 2001. But everybody knew that his term, as then defined, could not last more than twelve months; a year later he is in office 8216;8216;until further orders8217;8217;! Is such uncertainty really what the Unit Trust of India needs?
There is lethargy even in the 8216;Rescue UTI8217; plan. The union government must find Rs 3,000 crore to nurse the mutual fund. This is proving surprisingly difficult. 8216;Surprisingly8217; since the Industrial Development Bank of India easily wrote off Rs 11,000 crore for a single corporate entity, the Essar group. Why does the bureaucracy find it so much more difficult to find a third of that amount to rescue 20 million middle-class investors in the Unit Trust of India?
How about the Life Insurance Corporation? I believe a panel has already picked a candidate for the top job. But for reasons nobody quite understands the papers have not moved beyond the finance ministry for months.
Lethargy is on show even when it comes to finding suitable men for various nationalised banks. For these, the selection panel includes the governor or deputy governor of the Reserve Bank, an eminent professor from one of the Indian Institutes of Management, a former chairman of the State Bank of India, and the banking secretary.
The babus in the finance ministry apparently want to tinker with the panel8217;s recommendations. Last year, matters reached the stage where the disgusted Reserve Bank governor wrote to the ministry, begging that both he and his institution be spared from participation in any further farce of a selection!
The question of appointments is just one of many problems for Jaswant Singh. His inheritance includes over 2,000 FERA cases, and about another 15,000 that are under adjudication. These are headaches for as many as 900 Indian corporate entities.
All this does more than clog the legal system, it also reinforces the impression that India is an investor-unfriendly destination to park one8217;s money. As external affairs minister, Jaswant Singh would have ascertained what it takes to woo investors; as finance minister it is up to him to put what he has learned into action.
There are some cases where FERA violations should be pursued vigorously, as for instance where organised crime and terrorism are concerned. But can8217;t the finance ministry conduct a rapid overview of the other cases, close the files on them as quickly as possible, and concentrate on the real crooks?
So far, I have spoken of the short-term appointments and of the medium-term unclogging the courts. Let us now look slightly farther, to the problem of India8217;s debts, now US 100 billion. The actual figure is 110 billion, but creative accounting defines the India Resurgent Bonds and the Millennium Bonds as 8216;8216;deposits8217;8217;.
US 17 billion of this total debt is in the form of external commercial borrowings. India is paying very highly for this, almost 15 per cent. 9 per cent of this is the actual interest and 6 per cent is caused by the depreciation of the rupee against the dollar. Now, consider this: India has reserves worth US 55 billion, on which it earns returns of just 1 per cent!
This is an insult to common sense. Interest rates today are relatively low. So, why doesn8217;t India borrow at the new, lower rates to pay off the old, high-cost loans? This is an area where the finance ministry has been at its unimaginative worst.
Sick institutions. It isn8217;t just the Unit Trust of India, you can add the Industrial Development Bank of India and Industrial Finance Corporation to the list. Vacancies to be filled. Ways and means to juggle debt. The missing 8216;8216;feel good8217;8217; factor. There is no dearth of problems for Jaswant Singh in his new post.
Yashwant Sinha got a lot of bad press, but one legitimate criticism was that he seemed a bit stale towards the end, just going through the motions. Jaswant Singh brings a breath of fresh air into the finance ministry. Now, if only the 8216;8216;real8217;8217; finance minister up there would oblige him with another puff or two, we would be all set.
Or would we? A good crop would mean more problems for the Food Corporation of India, which is already struggling to find space for previous years8217; purchases. Whether feast or famine, Jaswant Singh has his work cut out for him.
