Book excerpt: ‘The most serious differences arose with Nirmala Sitharaman’

Of these, there were no serious issues with Dr P.K. Mishra and P.K. Sinha during these two years. There were serious differences with Piyush Goyal on policy issues, which I have recounted in the book We Also Make Policy. As he was not a full-fledged finance minister, these issues did not lead to any serious interpersonal problems.

Nripendra Misra was the real administrative decision-maker in most of the policy issues I was concerned with. Despite his initial impressions of me being an upstart, he developed enormous confidence in me as my innings progressed. He involved me in many matters that were not of direct concern to me. He would consult me and take my opinion into consideration on serious and contentious issues in the Ministry of Finance.

He would also use me to troubleshoot many times. In the last six to nine months, however, there were more issues on which he felt that my approach and stand were inappropriate. As he is not one to hold himself back, he would expressly tick me off and criticize me. Sometimes, he would exclude me from the decision-making process. Here I am recounting the matters where the going really became tough, sometimes a bit unpleasant, contributing to my leaving the government finally.

The most serious differences arose with Nirmala Sitharaman. In this chapter, I recount some of these not mentioned elsewhere in this book. The prime minister also started cooling off towards me in my last few months in the service.

‘Why did you do it?’

The coin and currency division processed cases for issue of commemorative coins with portraits of eminent persons in line with the department’s order issued in 2017.

The government wanted commemorative coins to be issued on the birth centenary of Rajmata Vijaya Raje Scindia. The proposal was received in the department sometime in 2017-18. The birth centenary probably fell in 2020.

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The examination of proposal when it was received for the first time revealed that it was not in accordance with the departmental guidelines as the commemorative coins were issued for only those individuals who had attained excellence in public life, in areas such as science, literature, arts, including performing arts, or had made exceptional intellectual contributions.

The rules made it very clear that commemorative coins were not to be issued for politicians. This first examination had concluded that Vijaya Raje Scindia was not eligible as her contributions in public life were political and not in any of the five areas mentioned in the guidelines. The proposal was not approved.

Perhaps because of the Lok Sabha elections in 2019, there was a political decision to issue the commemorative coin in Vijaya Raje Scindia’s name. The message was conveyed to me by Nripendra Misra. The examination this time by the coin and currency division was not rigorous in terms of guidelines (possibly, they had also received an appropriate message). The division and joint secretary Prashant Goyal recommended that the commemorative coins be issued in her name.

I found the proposal on file inappropriate for two reasons. First, the very fact that the guidelines as they stood allowed commemorative coins to be issued for people with a record of excellence as scientists and in literature, arts and other intellectual domains, which Vijaya Raje Scindia did not satisfy, and therefore the proposal was violative of government policy. Second, I sensed that if this was done for her, it would open the floodgates for issuing commemorative coins for other politicians as well.

I wrote my note on the file opposing the proposal and sent for appropriate orders to Arun Jaitley. Before perhaps it reached the table of the finance minister, Nripendra Misra called, and in an irritated tone asked me why I had done this despite the PMO backing the proposal. I told him my reasons.

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Finance Minister Arun Jaitley overruled me. The proposal went to the PMO for the PM’s approval (all proposals for commemorative coins were finally approved by the PM), who approved it. The Prime Minister released the special commemorative coin of Rs 100 denomination to mark the completion of birth centenary celebrations of Rajmata Vijaya Raje Scindia on 12 October 2020.

‘Don't ever go to the PM over my head'

The amended Fiscal Responsibility and Budget Management (FRBM) Act required the government to bring down the fiscal deficit to 3 per cent by 2020-21.

To continue with the glide path, we proposed the fiscal deficit to be retained at 3.3 per cent in the revised estimates of 2018-19 and fixed it at 3.1 per cent for financial year 2019-20 so as to peg it at 3.0 per cent in the year 2020-21, as envisaged in the FRBM Act. I had initially proposed attaining 3 per cent in the financial year 2019-20 itself, one year ahead of the target. Finance Minister Arun Jaitley thought differently and suggested it be kept at 3.2 or 3.1 per cent for 2019-20. We settled for 3.1 per cent.

Suddenly, one day, Expenditure Secretary Ajay Jha advised Arvind Srivastava, joint secretary, Budget — who has been recently appointed as the revenue secretary, Government of India — to keep the fiscal deficit at 3.4 per cent for financial year 2018-19 and 3.3 per cent for 2019-20. He told Srivastava this was what the PMO (Nripendra Misra) wanted. I found this quite strange. First, it was conveyed in such a roundabout way (why was I not told directly?) and, second, deviating fiscal deficit by 0.1 per cent in the revised estimates made no sense; it was small money but would convey a bad message to the markets about the government not being able to stick to its deficit estimates.

Arun Jaitley had left for the US by that time. I conveyed it to him. I also took the matter up with P.K. Mishra in the PMO. He, too, found the change baffling. It seemed Nripendra Misra had spoken to the PM about it and indicated that some slippage on the fiscal deficit was necessary on account of the envisaged new PM KISAN scheme (one instalment of 72,000 to 10 crore farmers was roughly equal to 0.1 per cent of India's GDP). P.K. Misra agreed that I should meet the PM and explain the fiscal numbers to him. He also set up my meeting with the PM.

Prime Minister Modi heard me out and was completely clear. He wanted one instalment of PM KISAN to be accommodated. But he also agreed that it would be better if the fiscal deficit could be maintained at the budgeted level. However, he wanted Arun Jaitley to be fully on board and advised me to take his views. I did that the next morning. Arun Jaitley agreed, and I told the budget division to retain the fiscal deficit at 3.3 per cent for revised estimates for 2018-19 and 3.2 per cent for 2019-20.

That evening was reserved for the presentation of the draft budget speech to the PM. All the secretaries of the Ministry of Finance were waiting in the adjoining room before the meeting. Suddenly, Nripendra Misra walked in.

At his furious worst, he asked me whether I had met the PM to discuss the fiscal deficit issue. After I confirmed that I had done so, he blew up. Quoting statistics from the UPA era when the fiscal deficit had ballooned after the global financial crisis, he questioned the very logic of the fiscal consolidation path and the Ministry of Finance’s fixation with low fiscal deficits. He bluntly said I had no business going over his head to discuss the matter directly with the PM. I listened to him without demur, only saying I was simply following the call of duty.

I made the presentation before Prime Minister Modi, which went reasonably well. The subject of deviating from the fiscal deficit did not come up in the discussion. Nripendra Misra also did not raise it. I took that to mean that we would stick to 3.3 per cent for the revised estimates, as agreed by Finance Minister Arun Jaitley.

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After the meeting, the expenditure secretary stayed back and waited till the taxation-related discussions (in the next meeting in which I and he were not invited) were over. Apparently, once the meeting was over, he checked what to do about the fiscal deficit with Nripendra Misra. Nripendra Misra told him (as he conveyed to me the next day) that the fiscal deficit would stay as he had originally wanted — 3.4 per cent for the revised estimates for 2018-19 and 3.3 per cent for the budgeted estimates for 2019-20. Ajay Jha also conveyed the PMO’s decision to Arun Jaitley, who reluctantly agreed. The final printed fiscal deficit numbers in the budget were what Nripendra Misra had decided.

‘You are not in tune with the thinking of the government’

Some additional matters besides the two cited above made Nripendra Misra become somewhat stiff towards me, though most of our normal interactions continued unaffected. He was perhaps a little bit bottled up as well. The lid finally came off in the matter of the second recapitalization of banks proposed to be done by way of providing funds in the second supplementary grants for 2018-19.

I had told Nripendra Misra in several meetings that the recapitalization programme was excessively large, and instead of spending so much money like that, we needed to design it better. Secretary, DFS, Rajiv Kumar, however, was pushing for it with little care for fiscal implication and stability. For my part, it was important to keep the size of recapitalization as small as possible to not excessively burden the fiscal resources of the government.

The principal secretary took a view on the funds to be provided as recapitalization bonds for PSBs and conveyed it to Rajiv Kumar. Kumar went on leave for his daughter's wedding, and I was assigned the charge of DFS as well. The DFS put the file in line with what the principal secretary had indicated.

After studying the entire matter, I recorded a long note, pointing out how the DES prescription and its ask were not in the government's best interests. I also suggested an alternative formulation. With that, I submitted the file to finance minister Arun Jaitley.

The finance minister perhaps mentioned my file note to Nripendra Misra. He was livid. He called me. For the first time, I was clearly told: ‘The prime minister is unhappy with you. The finance minister is unhappy with you.’

‘Subhash, you are not in tune with the thinking of the government.’ The finance minister recorded a long note overturning my recommendations and approving the DFS formulation.

(Excerpted from No, Minister: Navigating Power, Politics and Bureaucracy with a Steely Resolve by Subhash Chandra Garg, with permission from Juggernaut)