Amidst clamour that BJP President Amit Shah will be rewarded for the party's stupendous performance in Lok Sabha Mandate 2019 with a berth in the cabinet, Finance Minister Arun Jaitley wrote to Prime Minister Narendra Modi seeking time to recover from health issues while requesting that he should not be considered for cabinet berth until then.
If at all, Shah needs to be pulled out of his role as BJP President, his next perch would ideally be the finance ministry which is truly the de facto No.2 job in the cabinet today unlike the past when the all-powerful home ministry was considered the stepping stone to the top job. That perception may have been strengthened when the then home minister LK Advani was also given the role of deputy prime minister under the Atal Bihari Vajpayee government.
But if there's anything that needs crisis management today, it is the economy. Modi surely needs his best man for the toughest job in the Cabinet. Shah has held multiple portofolios in Modi's Gujarat government. He was the chairman of Gujarat State Financial Corporation and also revived the Ahmedabad District Cooperative Bank as its chairman. A former stock broker, he has displayed unique native intelligence in managing BJP's campaign--just what could come handy in reviving the economy from the ongoing slowdown.
However, in the midst of a lot of kite-flying the only other name that appears an obvious choice is Piyush Goyal whose two short terms as interim finance minister during Jaitley's absence have given rise to the belief that Modi may be grooming him for the lead role at FinMin.
The new FM's priorities are crystal clear: After TsuNamo II, India awaits TsuNomy I-a rapid recovery from the economic slowdown.
India's economy has slowed down from 8.17 per cent growth to 6.98 per cent in the past 3 years. In just the past 3 quarters, the slowdown has been exacerbated by a dramatic fall in consumption as demand for durables, automobiles, FMCG and even cement and steel have been hit. That leaves public investment (government investment into infrastructure and development) as the only engine of the economy that is still functioning. Private investment is at a 14-year low and India has completely failed to capitalise on the growth in global economy in the past 5 years.
The new FM will need to prioritise higher GDP growth by re-doubling the efforts in public expenditure through infrastructure with the hope that it will trigger new investment in 100s of allied industries such as cement, steel, logistics, commercial vehicles-a contagion that can then spread to other sectors. Higher corporate earnings and higher individual incomes would then trigger consumption back again. That's the only way industry's capacity utilisation currently in low 70s can cross 80 per cent for companies to start investment in new greenfield capacities again.
The next big priority has to be job creation, an area where Modi I fell drastically short. GST needs simplification and the new Direct Tax Code needs to be adopted. New Ease of Doing Business norms, which have been implemented in Delhi and Mumbai, need to be implemented across the country.
FinMin needs to continue the ongoing clean-up of NPAs in the banking and NBFC sectors to strengthen them to drive the next round of economic growth.
And the new FM will also need to find more than Rs 1 lakh crore of resources for new social schemes such as PM-SAMMAN, PM-JAY and others. For that, he will need to find new avenues for taxation or recovering black money or disinvestment, each job more difficult than the other.
All this, while maintaining the fiscal discipline so that India continues to head towards the 3 per cent fiscal deficit target whose roadmap has been missed in every successive Budget.
FinMin also has to stop playing wink-wink with the banks for their failure to pass on repo rate cuts to the industry and the consumer. Despite the fact that interest rate is a key trigger for fresh investments, consumer loans and higher consumption and economic growth, the FinMin has failed to penalise the banks. RBI repo rate has fallen 11 times and 200 basis points from 8 per cent in January, 2014 to 6 per cent till April 2019. However, India's largest bank SBI-from whom the banking sector takes cues for interest rate changes-has reduced lending rate by only 20 basis points from 10.15 per cent to 9.55 per cent.
But all this will need to be backed by key reforms that have been pending: labour reforms which have been vehemently opposed by labour unions; land reforms which have a bearing on the farmers and often poor land owners; administrative reforms that loosen the grip of the bureaucracy and reduce corruption and even legal reforms which can eventually cut the astounding backlog of over 3.3 crore pending cases in courts. India also desperately needs a new industrial and manufacturing policy and a revamped export policy.
All this requires deft handling, not just of FinMin but also dealing with, cajoling and coaxing the other ministries. It requires a man of stature. Who could it be?
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