Vijay Kumar Gaba

 Being the finance minister of India is arguably one of the most challenging jobs in the world. The incumbent has to deal with 28 Federal States and 8 Union territories, each having a distinct socio-economic and fiscal profile. Unlike some developed countries like the USA, the Federal States in India are not autonomous and/or self-reliant in fiscal matters. These states rely on the Union Government for financial resources. Besides, the finance minister of India is limited by the constitutional mandate of being “socialist”. To make things more complicated, implementation of GST; acceptance of the recommendations of 15^th Finance Commission; and abolition of the planning commission have materially curtailed the powers of the union finance minister.

Technically speaking, all the policies formulated and proposed to be implemented by the union finance ministry must pass the test of “socialism”, since the Constitution of India overrides all the legal provisions and policy directives. This makes it very hard for the finance minister to pursue the goal of faster growth through promoting capital investments in the private sector that are likely to eventually result in more socio-economic inequalities.

Even when the finance minister tries to extend fiscal and other support to large businesses to stimulate economic growth, these efforts are invariably met with strong opposition from the politicians belonging to the ruling party & opposition; civil society and common people.

To mitigate the political damage that may be caused by such criticism, the finance ministers have often supported the larger public sector; contrary to the stated policy of minimizing the role of the government in business. Also, the finance ministers in India have often taken the path of ‘crony socialism”.

They often pursue fiscal policies targeted to benefit a specific set of voters and/or specific regions; inviting criticism from the businesses and capital market participants. The finance minister is often criticized for inaction in terms of economic policy and reforms; fiscal imprudence in pursuing profligate social policies and programs; incoherent foreign policy; failure of monetary policy in controlling consumer prices; impeding critical infrastructure projects; incongruent taxation policies; and corruption in financial institutions etc.

The socio-economic condition (especially the fast waning demographic dividend) of the country warrants that the governments vigorously pursue the course of faster and sustainable growth over the next couple of decades. However, the pursuit of this goal would inevitably result in widening and deepening inequalities of income and wealth.

The experience of western developed economies indicates that faster growth ultimately results in 10:90 division of the society – 10% people owning most of the wealth and accounting for most of the savings; while the rest 90% just survive. Of course, the standard of life for the underprivileged 90% in developed countries is much better than the corresponding 90% population in India.