The myth of a powerful FM

How being an FM is not easy, despite leading the most powerful ministry

- MADAN SABNAVIS

THERE IS OFTEN debate on whether economics drives politics or politics trumps economics. The second volume on Indian finance ministers by AKB, as the author is well known as, helps one decide to some extent. While economics drives politics to an extent, the reverse relation is stronger.

A common observation that pervades both the volumes is that the FM is not an independent person or entity. Often, we tend to say that certain FMs did a betterjob when presenting budgets relative to others. But what AKB reveals in this book, which is as interesting as the first, is that all decisions are centralised with the prime minister.

Any major move that is announced by the FM in the Budget is motivated by the PM.And the FM does not really have a choice even if there is a large amount of discomfort with the decision.

Not surprisingly, Sardar Patel could do nothing on demonetisation, which then prime minister Morarji Desai was keen on.

We also get to know that RBI governor KR Puri had to quit in 1977 because he was part of the Indira Gandhi establishment and did not find favour with the new government of Morarji Desai. Hence politics had influence on the appointment and tenure of the RBI governor as far back as the Seventies. Much later in the day, governor RN Malhotra resigned in 1990 ahead of his term, as his advice against high government expenditure to the Yashwant Sinha-led finance ministry was not received favourably.

Another well-known ideological conflict was the one between deputy governor YV Reddy of RBI and FM P Chidambaram. The two differed on the pace of rupee 'depreciation' that was invoked by RBI, much to the chagrin of the FM during the Asian crisis in 1997.