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FM and his trusted lieutenant

A K Bhattacharya | November 03, 2004

With the appointment of Rakesh Mohan as the economic affairs secretary, Finance Minister P Chidambaram has completed the task of putting in place all key members of the top secretarial team that will assist him in presenting the much-awaited Union Budget for 2005-06 next February.

Expectations from the Budget are already running high as Prime Minister Manmohan Singh recently explained how his government had little time to put together its first Budget and that the second Budget will focus on further tax reforms and strengthening of the tax administration system.

Chidambaram had himself admitted to journalists that the July 2004 Budget did not give him the full year's benefits and that he would prefer to be judged by what he did in the Budget that will be presented in February 2005.

So it is pertinent to take a close look at the key members of his team that will put together the all-important Budget next year. Only two members who were associated with former Finance Minister Jaswant Singh's last two Budgets (one of them was an interim Budget), have survived the top-level bureaucratic changes that took place in the past few months.

Chief economic advisor Ashok Lahiri and expenditure secretary D Swarup provide continuity. There is a new revenue secretary in K M Chandrashekhar (who succeeded Vineeta Rai after her retirement) and, of course, the economic affairs department is now being looked after by Rakesh Mohan (in place of D C Gupta, who also held the position of the finance secretary till his superannuation last week).

Why Rakesh Mohan was not made the finance secretary in charge of the economic affairs department is still a matter of debate and speculation among senior bureaucrats.

Before he went off to the Reserve Bank of India as deputy governor, Rakesh Mohan was in North Block as advisor to then Finance Minister Yashwant Sinha.

At that time, too, Mohan was not given the chief economic advisor's post, even though he functioned like one.

One of the reasons cited by bureaucrats then was that although there was no CEA in place, the post had not technically fallen vacant -- its occupant had only gone on long leave.

Mohan had a short stint in the finance ministry. He had almost left to join the Infrastructure Development Finance Company, but was persuaded to stay back. A few weeks before Sinha left the finance ministry in July 2002, Mohan's appointment as RBI deputy-governor was cleared and he left North Block soon after.

The significance of all this is that the finance ministry will now be run in almost exactly the same way as when Mohan was the advisor to the finance minister in 2001-02.

Yashwant Sinha gave C M Vasudev charge of the economic affairs department but did not make him the finance secretary. The apparent reason was that S Narayan, the revenue secretary at that time, was senior to Vasudev.

And according to the convention, the senior-most among all three secretaries in the finance ministry is given the designation of the finance secretary. But Sinha was not keen on making a revenue secretary the finance secretary (a departure he had made earlier for Piyush Mankad).

So the Union Budget for 2002-03 was prepared and finalised without having a finance secretary in place. There was some confusion over who would call the shots at the official-level Budget meetings and who would chair them.

Even though Vasudev led the Budget show, the revenue and expenditure secretaries often reported to the finance minister directly on many of the Budget issues, adding to the confusion.

If Chidambaram does not change his mind on not conferring on Rakesh Mohan or on any other secretary the post of finance secretary, the same confusion is likely to prevail now.

Chidambaram's decision, of course, is being seen as a victory of the IAS lobby. According to some bureaucrats, the powerful group of IAS officers had argued that there were a few secretaries in the government (including the current revenue secretary) who were not junior to Rakesh Mohan, who, needless to point out, is not an IAS officer.

So, making Rakesh Mohan the finance secretary would be unfair to those senior IAS officers, it was argued.

The argument, however, does not appear convincing for two reasons. One, when Manmohan Singh was the finance minister in the 1990s, he faced a similar problem.

He brought in Montek Singh Ahluwalia from the commerce ministry and made him secretary in the economic affairs department. But Revenue Secretary K P Geethakrishnan, an IAS officer, was senior to Ahluwalia.

So Manmohan Singh made Geethakrishnan the finance secretary, till he went off to Washington as an executive director on the board of the IMF and Ahluwalia could succeed him. So why should Singh not insist on the same formula, now that he is even more powerful as the prime minister?

Two, the IAS lobby has actually lost out in the current allocation of key secretarial portfolios. For instance, this is the first time in the finance ministry in recent times that two of the secretaries' posts have gone to non-IAS officers.

Both the economic affairs and the expenditure secretaries do not belong to the IAS. How the powerful IAS lobby let this happen is difficult to understand.

It is possible that because the IAS lobby lost out in this manner, the government made a compromise and agreed not to make Rakesh Mohan the finance secretary so as not to further disappoint the already aggrieved IAS officers. Or is there some other reason?

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