Thursday, December 11, 2008

Confessions of a Swadeshi Reformer

Confessions of a Swadeshi Reformer: My Years as Finance Minister, by Yashwant Sinha 

4 stars
Firstly, there is little by way of confessions in this book. None of the kind that would create front page headlines. However, Yashwant Sinha, former finance minister and then external affairs minister for India under the short-lived Chandrashekhar government in 1990-1991 and later in the Vajpayee NDA government between 1998 and 2004, does write eloquently about his swadeshi reforms. He comes across as honest and candid about his days in politics, with frank statements on issues that you would not expect from a career politician. Yashwant Sinha is in many ways not a career politician. He spent some two decades in the Indian Administrative Service, before joining politics in 1984.

It is also clear that Yashwant Sinha is disappointed, and mostly justifiably so, that while Manmohan Singh and then P Chidambaram are seen as the architects of India's economic reforms, his contributions and to some extent pathbreaking steps towards opening up and reforming the Indian economy have not been given their due attention and credit. Hopefully, when the history of the Indian economic reforms that started in 1991 is written, Yashwant Sinha will no longer remain the 'unsung hero of India's reforms' but be recognized as its pioneer and major architect.

The book is divided into three sections, "The Finance Minister Presents", "Policy and Reforms", and "Confessions of a Swadeshi Reformer". The first section is mostly a chronological account of his years as India's finance minister, the second section takes a look at some specific areas of policy in areas like the insurance sector, telecom, banking sector, etc... The third section is where he talks about some of the controversies and allegations levelled against him, including allegations of corruption, the labelling of Yashwant Sinha as "rollback Sinha", his thoughts on capitalism vs socialism, and more.

All in all, this is an engrossing read, well written, with a refreshing amount of candour, short enough (261 pages) to be read in a single sitting. It could have done with more references and details, and some of the characters in the book could do with more context for not intimately familiar with the political landscape in India. One minor quibble is that Yashwant Sinha makes copious use of the 'perpedicular pronoun', excessive usage of the word 'I'.

  • "we were mortgaging our most precious asset, gold, which Indians are sentimental about, to save something even more precious - our honour and prestige." Prologue, page xii, talking about the events when India had to mortgage its gold reserves to obtain a loan from the Bank of Scotland to meet its balance of payments obligations in 1991.

  • "... the Bank of Scotland, however, insisted on the gold being shipped to England.". Page 23. Maybe the bank was only being prudent and responsible at a time when India's foreign exchange reserves had fallen to about one billion dollars, enough to cover less than one month's worth of imports, but one wishes the bank had displayed a little more grace.

  • "Giridhar Gomango, who was the chief minister of Orissa, was technically still a member of the Lok Sabha. He was asked by the Congress party to come to the House that day and vote against us. Many felt it was morally not correct for him to do so. But politics and morality do not often go together." Page 70. I think he is referring to the no-confidence motion of 1999 that brought down the NDA government by one vote. Yes, one vote. You do not get any closer than this as far as margins go.

  • "In 1998 my son Jayant introduced me to his friend from IIT Delhi, Raghuram Rajan.... He suggested to me that, as in the United States, if we encouraged housing in India, it could become a major multiplier of economic prosperity. ... " this advice was taken to heart by Yashwant Sinha, who then implemented changes in successive budgets, that led to an "increase in deduction for interest on borrowed capital from Rs 15,000 to Rs 30,000 for self-occupied property. In subsequent years, I raised it to Rs 1,50,000". Page 100. Notwithstanding the current global financial crisis, the bursting of the housing bubble in the US, and the massive correction in the Indian real estate sector also, it remains undisputed that this income tax exemption granted to interest on housing loans has been a major factor contributing to the growth of home ownership in India.

  • "People hate to be brought within the tax net." Page 118

  • "The propensity in India is not to pay taxes. People want everyone else to be taxed but not them." Page 123. True. Ask politicians, businessmen, and everyone who cheats on his taxes.

  • "Intra-cadre rivalry was its worst in the Central Board of Excise and Customs. The officers here did not mind cutting each other's throats to reach their senior positions. They filed anonymous petitions against each other (unfortunately many were often true)." Page 125

  • "The first was to reduce T & D - Transmission and Distribution - losses, which the Prime Minister described as theft and dacoity losses." Page 140. It's no wonder that politicians across parties, regions, and ideologies are all, almost without exception, against privatization of any part of the electricity sector - generation, transmission, distribution, etc... There is a lot of talk about reform, but little by way of concrete, specific action.

  • "Fiscal deficit, apart from the economic malaise that it represents, also raises the serious question of inter-generational equity." Page 144. This statement becomes even more important in the light of the massive amounts of money being committed to the oil bonds floated by the government. The current generation is using oil at subsidized prices, the full cost of which will have to be paid by future generations. As economists have said, high oil prices work on the one hand to drive investment towards drilling and refining activities, but also on the commercialization and R&D into alternate forms of energy on the other hand. The opposite is true when prices are depressed. Think of the explosion of gas guzzling SUVs from Detroit, Europe, and Japan during the second half of the 1990s when oil prices were as low as $10 a barrel.

  • "I had expected opposition to this move (FRBM) in the cabinet but, surprisingly, it went through without much discussion. I used to make such a fuss about the fiscal deficit in cabinet meetings that I suppose my colleagues decided to spare themselves further agony of having to listen to me one more time." Page 149. A candid confession by Yashwant Sinha, and a subtle dig at the intellectual level and appetite for any serious discussion among our politicians.

  • "... but I could not understand how the quantity of steel required could go up over the years." Page 154. Yashwant Sinha here is referring to cost escalations that are rampant in almost any construction activity undertaken by almost any arm of the government. The cost of steel can go up, but how can the amount of steel needed to construct a bridge go up??!!

  • "... how once a colleague rang me up and said that we should not privatize a particular PSU since it was the only PSU under his charge." Page 159. No public sector undertaking, no ministry, no minister. Therefore, self-interest rules supreme.

  • "PSUs of the Government of India have long been milch cows for politicians, trade unions, and bureucrats. They must be privatized for this reason alone, if for no other reason." Page 159. Yashwant Sinha is perhaps the most passionate when talking about the malaise in the public sector undertakings, the wastage of money and resoures, and the resistance to their privatization from all quarters. Little ideological underpinnings to the arguments made by communists, labor union leaders, and politicians - but for the most part it's self-interest, often at considerable cost to the nation, that is at work here.

  • "... I had referred to the large investment made by the UTI in the shares of Reliance Industries earlier in an off-market transaction in one day. This was done when Manmohan Singh was finance minister." Page 217

  • "As I was about to leave, Jayalalitha handed me an envelope. Later, when I opened it, I found it was a note about her income tax cases." Page 226. For those familiar with the people here, Jayalaliths is generally recognized as one of the more corrupt politicians.

On socialism, excessive controls, pernicious system of quotas and licenses, Yashwant Sinha is positively livid with rage.
  • "Everyone flourished under the this system. Officials and ministers of the government weilded enormous powers."
  • "Losses were worn as a badge of honour."
  • "competition became anathema"
  • "... and the common man suffered the most because for him everything was scarce, expensive, and of poor quality."
  • "... we distributed poverty in the name of equity and social justice." Page 243-
  • "... we must distribute wealth in the future. There are many who believe that equity lies in the country remaining poor. We shall have to get rid of the mindset that creating wealth is sinful."
More information:
Publisher's book page:

Published by : Penguin Books India
Published : June 2007
Imprint : Viking
Cover Price : Rs 450.00
ISBN : 0670999520
Edition : Hardback
Format : Demy
Extent : 272 pp
Classification : Non Fiction
Rights : World

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