A Ministry of Finance for the 21st Century

Finance ministries worldwide drive economic reforms. It's time to restructure India's to meet the challenges of tomorrow

- K P KRISHNAN

Over 20 years ago, then finance minister Jaswant Singh formed a committee led by Vijay Kelkar, resulting in a report titled "A Ministry of Finance (MoF) for the 21st Century." That report remains a key starting point for thinking about building a sound MoF.

Finance is the brain of the economy, and the MoF is the brain of the Union government. The researcher Philipp Krause has described the emergence of state capability in the MoF as rising from a more transactional role (the plumbing and accounting of moving money on the expenditure side) to a more policy role.

A sophisticated MoF nurtures the macroeconomic and financial institutional arrangements that constitute the commanding heights of the economy, and thus enables private and foreign investment. It develops a situational awareness of the barriers to growth, and uses the budget function to negotiate reforms with all ministries.

The MoF today consists of six departments, namely the departments of economic affairs (DEA), revenue, expenditure, financial services, investment & public asset management, and public enterprises. It is interesting to compare this structure with the alternative structure, such as that of the Ministry of Home Affairs or the Ministry of External Affairs, where there is no intra-ministry demarcation into multiple departments.

Like the home secretary and the foreign secretary, the Government of India (GoI) has a finance secretary. The finance secretary is, however, a pale shadow of the other secretaries, namely the foreign secretary, and an even paler shadow of the home secretary. The home and foreign secretaries are the heads of their departments, and all senior officers in these departments report to them. The coordination and resolution of conflicting views of different units within the depart-