A. K. Bhattacharya has had a long career as a business journalist. He has reported on the Finance Ministry for four decades or more. He is now capping his distinguished career by writing a history of our Finance Ministers. This is the first volume of what aims to be a three-volume series.
This book, India’s Finance Ministers: From Independence to Emergency, covers the period chronologically with each tenure getting a separate chapter. It covers eleven tenures but nine personalities since TT Krishnamachari and Morarji Desai each had two terms of office. It stretches from Shanmukham Chetty in 1947 to C Subramaniam in 1977.
Bhattacharya relies heavily on the Budget speeches of the Finance Ministers, as well as the official history of the Reserve Bank of India. In addition, he has used autobiographies when available in English (Deshmukh and Desai).
He perforce ignores C Subramaniam’s Tamil sketch. He also quotes from the biographies of other politicians and the autobiographies of Finance Ministry officials.
The ‘lightweights’
Jawaharlal Nehru had been singed by the Budget of Liaqat Ali Khan in the Interim Government of 1946. He picked economists or lightweight politicians as his first Finance Ministers. These were Shanmukham Chetty, Dr John Matthai, and CD Deshmukh, hoping to impose his political will on them without fuss.
Gandhi similarly resorted to the relatively unknown but accomplished lawyer, Sachindra Chaudhuri, to be the guilty Finance Minister who served as a scapegoat for the 1966 rupee devaluation. All three of Nehru’s experts resigned and Bhattacharya narrates the story.
But the resignation of John Matthai highlights the temper of the times. The Congress party of the freedom struggle had been a “broad church” party. It accommodated both communists on the left and traditionalists in favour of a free market.
Nehru wished to convert it into the Church of Socialist Salvation. His chosen method was to set up a Planning Commission and launch a mixed economy with an ever-expanding public sector.
Dr Matthai foresaw that the Planning Commission would usurp some of the Finance Ministry’s control over budgetary expenditure and a system of dual control would be inefficient. In the upshot, the Plans required impressive budgetary resources A large budget deficit became standard fare.
The RBI pretended deficits were extraordinary and issued temporary treasury bills on an ad hoc basis. Tears were shed over inflation, the unhappy food situation and ever-greater controls were imposed on scarce foreign exchange.
Tax rates ascended incessantly with marginal income tax rates reaching 975 per cent under YB Chavan during Indira Gandhi’s rule and then dropping a little.
The black economy was a fact of life and the zeitgeist is best seen in Bhattacharya’s account of TT Krishnamachari as a sitting Industries Minister convening a meeting to persuade industrialists to donate to the party! Bhattacharya has relied too heavily on the Budget speeches.
These always have an air of self-congratulation and pious advice and this is carried forward into this book. There is a grave downplaying of our varied and indeed structural economic troubles. Some more analysis and passing of verdicts would have helped to bring out our economic and political weaknesses.
The reader may look at the spectacle of Indira Gandhi as Prime Minister personally negotiating a rupee-dollar rate in Washington in March 1966. It seems the Finance Minister was told this rate only in June 1966 right before the public announcement. And his head subsequently rolled. These were dangerous times but one has to read between the lines to glimpse the drama.
FM-PM relationship
The political relationship between the Prime Minister and the Finance Minister creates and limits opportunities for the FM’s own performance. Bhattacharya’s best chapters are on the Finance Ministers who got on famously with the Prime Minister: CD Deshmukh and TT Krishnamachari in Nehru’s time and C Subramaniam and the independent Minister of State, Pranab Mukherjee, in Indira Gandhi’s days.
So successful was Deshmukh that he continued in other offices while TTK made a comeback. The Mundra scandal which led to TTK’s exit is brilliantly described.
The political heavyweights such as Morarji Desai and YB Chavan, however, get adequate space but perhaps inadequate understanding. Bhattacharya finds much to praise in Indira Gandhi’s learning stint in the Finance Ministry, a job her biographers have generally skimmed over.
But it is in his recreation of the wave of nationalisations, life insurance, general insurance, social control, and then nationalisation of 14 major banks that Bhattacharya is at his best. He also describes the delicate relationship with the Reserve Bank and the uproar after TTK’s famous description of it as a Section of the Finance Ministry.
In passing he notes Dr Manmohan Singh working as an Additional Secretary under Pranab Mukherji but he declines to comment. That is another relationship that will cast a shadow over the subsequent volumes which will be awaited. Bhattacharya deserves congratulations for this pioneering work.
(The reviewer is a retired IAS officer of the Tamil Nadu cadre)
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