Remembering Arun Jaitley and the mark he left on the Indian economy

Former finance minister Arun Jaitley on the trading floor before ringing the closing bell of the New York Stock Exchange on June 17, 2015. Photo: PTI
Arun Jaitley will be remembered as the finance minister during two of the biggest seismic events in India’s economic history — demonetisation and the goods and services tax (GST).

While helming affairs at North Block, he put in place a number of economic laws and measures. These include the Insolvency and Bankruptcy Code, the Black Money Act, amendments to the Benami Act, the Fugitive Economic Offenders Act, banking reforms through the ‘Indradhanush’ programme, mergers of a number of state-owned banks, and a record number of divestment proceeds. For policy watchers, however, his biggest achievement was perhaps fiscal rectitude, something on which he had the unequivocal backing of Prime Minister Narendra Modi.

For his first Budget in July 2014, Jaitley inherited a fiscal deficit target of 4.1 per cent of GDP. “The target is indeed daunting. Difficult, as it may appear, I have decided to accept this as a challenge. One fails only when one stops trying,” he had said. From 4.1 per cent, the fiscal deficit came down to 3.4 per cent by 2018-19. There were two slippages from the budgeted targets, in 2017-18 and 2018-19, the former due to introduction of the GST. Arvind Subramanian, who was chief economic advisor under Jaitley, has described him as the best boss he has had. Jaitley backed his bureaucrats to the hilt whenever they came under attack. Even when he had to discipline some of them in private, he never criticised them publicly. An example is when Jaitley made it known to people who met him that he was unhappy with Subhash Garg, who was then finance secretary, for tweeting against a comment made by then Reserve Bank of India (RBI) deputy governor Viral Acharya. In public, Jaitley backed Garg.

In informal conversations, current and past bureaucrats, some of whom are still in very powerful positions, have spoken highly of him as a minister who trusted his bureaucrats’ judgement and experience. They would always count on his deep knowledge of the law, the Constitution, and parliamentary processes.

To some critics, it seemed that his reliance on officials may have been detrimental at times. It is still unclear what arguments bureaucrats had placed in front of Jaitley before the finance ministry sent a communication to the RBI last October, saying that it wanted to start consultations with the central bank under Section 7 of the RBI Act on a number of issues.

It was a move that led to the biggest breakdown in the relations between the government and the RBI in recent times. But that was perhaps an aberration as ever the peacemaker and negotiator, Jaitley played a key role in building a consensus to get the Constitution Amendment Bill on the goods and services tax (GST) passed in Parliament. Then, the GST laws were passed in the Assemblies to enable introducing the new indirect tax on July 1, 2017. In all the 33 GST Council meetings that he chaired, never once did decisions have to be taken through voting. All were through consensus. “The political noise outside is inconsistent with the harmony inside the Council,” Jaitley would say often.

But did his inclusive approach create problems? Critics of the GST say that its complex structure, incorporating five rates when the ideal situation would have been two or three, was a result of Jaitley trying to please everyone. One of his bigger achievements was to get the Insolvency and Bankruptcy Code (IBC) enacted, as a mountain of stressed assets hobbled the banking sector. Timely capital infusion in public sector banks and the move for merger of weak banks with strong banks ensured some stability in the financial sector.

Journalists covering the finance ministry will remember his informal interactions in North Block. These were different from his “durbars” in Parliament and elsewhere, in that these were more on policy than political.

There were of course gossip and anecdotes, some small tidbits of information which could be run as stories. But most importantly, he used these interactions to talk at length about the government’s thinking and reasoning behind any economic decision or policy, an invaluable reference point for journalists covering the government.

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