New Finance Minister P Chidambaram after assuming charge in New Delhi on Wednesday. Subhav Shukla/PTI
A Business Standard report on Wednesday suggested that the PM-Chidambaram relationship is now headed for better days. According to the paper, Chidambaram agreed to return to the ministry only after he met Singh to clarify his doubts. “Before he was named finance minister, he met Prime Minister Manmohan Singh and told him he didn’t want the job unless he was empowered to take tough decisions. This meant treading on political toes on the sensitive issue of cutting subsidies and ending some gravy trains.”
The newspaper also quoted Singh as having told C Rangarajan, the PM’s Economic Advisory Council chief, that he was fine with Chidambaram. “We think alike. We are on the same wavelength,” Singh is said to have remarked about Chidambaram.
If this is true, at least one side of the equation — the one between PM and FM — is on the right track while tackling the economic crisis. Under Mukherjee, the vibes were simply terrible. Apparently, Mukherjee, when he met Manmohan Singh with the budget papers, was told that introducing measures like GAAR and the retrospective tax may not be wise at this juncture, but Mukherjee simply brushed the PM’s views aside and said, “I have made up my mind,” writes Aditi Phadnis in Business Standard.
Chidambaram, in his third coming as FM (he was FM in the United Front government from 1996-98 and UPA-1 2004-08), appears to have begun with backing from both Manmohan Singh and Sonia Gandhi.
But good intent and political backing will be tested soon enough. On the day his name was announced for the finance ministry, two bits of bad news hit the headlines: the Reserve Bank said it won’t cut rates till the government acts on its fiscal problems, and the first quarter budget numbers turned out to be a shocker. The fiscal deficit number had hit Rs 1,90.460 crore – swallowing up 37 percent of the entire year’s project in the first three months.
Since this is a drought year, and growth is likely to stagnate at 6.5 percent or even taper down to 6 percent, the fiscal deficit is likely to cross the target of 5.1 percent of GDP. Chidambaram will have to pull off a miracle on cost-cutting or find new revenues quickly.
He can only hope that Sonia Gandhi, with her eyes on 2014, will give him at least one year to fix the finances before she asks him to open up the election-eve spending spigots again. With Manmohan Singh now assured of remaining PM at least till 2014, Chidambaram can also hope to have some backing from him.
Both their reputations are at stake this time. Both have similar interests in banding together to keep Sonia Gandhi‘s populist instincts in check. Their ambitions are no longer in conflict — at least till 2014.
The signs are propitious — but Chidambaram needs lots of luck to deliver this time. He has to get Third Time Lucky.
