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Arun Jaitley: The consensus builder who implemented India's historic reforms

There was nothing flashy, forceful or confrontational about the way Jaitley managed the economy that became the fastest growing in the world.

Updated: Aug 24, 2019, 11.20 PM IST
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Without much fuss, he pulled India out of what he used to call the “fragile five” that he inherited in 2014.
Year 1991 may be a watershed in India’s economic reforms history, but that momentous change was also a product of circumstances and pressures, forcing chief architect Manmohan Singh into taking measures in the face of a grave external account crisis. Arguably, the biggest post-Independence reform, a product of free will, not forced by circumstances, was the goods and services tax (GST), which came into force on July 1, 2017.

The credit for that reform, which brought India’s economic map that had been fragmented along state boundaries under the umbrella of “one nation, one tax”, goes largely to the then finance minister Arun Jaitley, though political will came from the prime minister, Narendra Modi.

Bureaucrats and politicians, cutting across party lines, would often say it would not have been possible without Jaitley. Many governments did try but failed to get states on board to subsume their powers into an amalgam with a large say for the Centre. The reform was languishing for as long as 17 years before it could be rolled out.

Jaitley managed the impossible — cajoling states, yielding to demands and, through perseverance, tiring the opposition. It was thanks to his manoeuvring that every GST proposal was cleared with consensus sans voting. The GST, in a way, encapsulated the economic management of Jaitley, who was finance minister for most of the first term of the Narendra Modi government, interrupted by illness that would eventually take him away.

There was nothing flashy, forceful or confrontational about the way he managed the economy which, under his watch, became the fastest growing in the world. Without much fuss, he pulled India out of what he used to call the “fragile five” that he inherited in 2014. He stayed with fiscal consolidation and prudent economic management even when there was turbulence.

In no time, he emerged as a super economic minister in the Narendra Modi government, guiding junior ministers in the government to reforms that saw deregulation of coal, transparent auction policy for natural resources, a greater opening up of foreign direct investment, among many others.

Among the best legal minds in the country, Jaitley instinctively knew what was legally possible and how a reform could be pushed through, or what could make it acceptable. He anticipated what others were thinking and was almost invariably ready with a counter, argument or even an offer. The journalists who interviewed him know how frustrating yet fun it was to interact with him. Even before the journalist said the first few words, he would start answering. He knew the kind of questions we were going to ask.

Of course, there were a few questions that he would not want to answer. He would either wave the question away or simply sit silent as if nothing had been asked. That’s the cue to move on. What made the interviews interesting was that he had a story for almost every context and an elephantine memory to pull it out of. He had the ability to connect with almost everyone, from the highest to the most ordinary person, which allowed him to get people to agree to his vision of the economy and even the most difficult of reforms. His relationships went beyond party lines, with many politicians from other parties turning to him for his astute legal advice and some-times even political advice.

He got the Reserve Bank of India to agree to the biggest monetary policy reform, one that it had been opposed to — to dilute the governor’s powers and agree to a committee arrangement for setting interest rates. That model is working successfully and is a big reason why India, for once, has inflation in low single digits.

It was his personal connect and steward-ship that ensured that demonetisation — which has become, in a way, symbolic of the Narendra Modi government’s attack on corruption and black money — was widely accepted despite the disruption it caused.

Without a Fuss
His personal equations, though, never came in the way of what was good for the country. He knew business-men but that would not come in the way of the other big reform, perhaps even more transformative than GST, that he implemented – the Insolvency and Bankruptcy Code.

The reform dovetailed nicely with the crackdown on the NPA and crony capitalism that he unleashed in partnership with the RBI. Businesses that thrived on unending supply of funds from state-run banks, are already on the verge of bankruptcy or are bankrupt, thanks to the insolvency law and the war on NPA. Many of these businessmen would know Jaitley well.

His famous line as commerce and industry minister in the Atal Bihari Vajpayee cabinet— no deal is better than a bad deal — has guided his successors in navigating their way through tough and tricky global trade negotiations. He oversaw the disinvestment of Modern Foods, the first one in the Vajpayee regime, which sowed the seeds for an aggressive privatisation policy. And, yes, he did it all without a fuss.

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