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Jaswant Singh's agenda

P Vaidyanathan Iyer | April 13, 2004

Finance Minister Jaswant SinghFinance Minister Jaswant Singh took over at North Block in July 2002. In less than two years, he appears pretty much settled in the finance ministry.

Notwithstanding his candid admission about being a non-economist, he is comfortable talking on a range of hard-core economic issues, from gross domestic product and fiscal deficit numbers to foreign investment policy and financial sector restructuring.

The finance minister's work ethos, too, has been distinct. He largely avoided the media in his present stint and let events speak for themselves: be it his handling of the Unit Trust of India fiasco or the Infrastructure Development Finance Corporation goof-up.

His style, so far, has been to confine himself largely to the big picture, leaving the nitty-gritty for his officers to attend.

Till the interim Budget for 2004-05 was presented, Singh did not seem to be too enthusiastic about his key officers. But things changed overnight.

In a Confederation of Indian Industry post-interim budget interactive session, he called his secretaries by their first names and showered praise on them. So much so that a secretary-level official in the ministry wondered if they actually deserved the bouquet.

In the last fortnight, Singh surprised many with a series of interviews in both the print and the television media. Whether the unusual gesture had anything to do with the general elections is debatable, but it did come at a time when India's economy is shining and the forecast, too, looks rosy.

He is quite confident now that GDP growth in 2003-04 will beat his own expectations of 8.1 per cent.

Talking to Business Standard on Friday, Singh spoke frankly on various issues, leaving again the details to be interpreted by the interviewers and the readers. If indeed the NDA is voted back to power, and assuming he is asked to occupy the North Block office again by the prime minister, one can expect significant changes in the policy environment.

A key reform in the Foreign Investment Promotion Board's functioning can be expected. While the FIPB was brought under the finance ministry's purview last year, Singh feels that there is no need for such an agency in today's liberalised context.

He will, however, have to convince his Cabinet colleagues about dismantling the board. Some other operational and technical issues, too, need to be sorted out in consultation with the Reserve Bank of India and the department of industrial policy and promotion.

Singh is also keen that the NDA agenda is implemented in letter and spirit. One promise that will involve some tightrope walking is on tax exemptions. The NDA agenda has set a two-year timeframe for scrapping exemptions.

So far, there has been a political reluctance to touch exemptions - despite the various expert committee reports including those under Parthasarthi Shome and Vijay Kelkar - and successive finance ministers have not dared to upset the middleclass.

The finance minister does not have to look outside the BJP for opposition. The BJP's economic think-tank argues passionately in favour of direct-tax exemptions. Much will depend, however, on the outcome of the elections.

The vote count, or the number of BJP members who make it to the Lok Sabha, will influence his actions. If the BJP has to depend on its NDA allies, then Singh's task will be doubly difficult.  But greater consolidation in the Indian financial sector can be expected. Singh favours a merger of public sector banks. Some policy guidelines may be expected from the banking division and the RBI.

More liberal foreign investment norms may also be under consideration; among them is an increase in the foreign direct investment limit for the insurance sector from 26 to 49 per cent and a partial opening up of retail trade up to 26 per cent.

It is certain that the NDA agenda would not have been drafted without Singh's economic inputs. Given this assumption, he has been bold in giving his consent to 26 per cent FDI in retail trade and removal of tax exemptions in the next two years. Singh will be watched closely and reminded of the NDA's agenda.

Foremost for him, though, will be to tackle his interim-Budget promises of revisiting the issue of standard deduction and tax exemptions, which were largely viewed as announcements with the elections in mind.

All this only if NDA comes back to power, and in Singh's words, "If I continue to be the finance minister."

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