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Growth by Self-seeking

In an ideological vacuum, what other basic message can one expect from government?

Public memory in these times is typically short. Pranab Mukherjee – who only recently moved from North Block to Rashtrapati Bhavan – is now getting a bad press for a­nnouncing the “retrograde” general anti-avoidance rules (GAAR), trying to reverse Vodafone’s circumvention of payments of capital gains tax to the Government of India, violating the “treasury view”, and a lot more, indeed for “killing the India growth story”. But just two years ago, he was “Finance Minister of the Year”, courtesy the monthly international affairs magazine The Banker, and again, “Finance Minister of the Year for Asia”, awarded by the newspaper Emerging Markets, both for standing by the “treasury view”! The suave and earnest P Chidambaram, who has just occupied Mukherjee’s former office, has started off with a bang. Of course, Prime Minister Manmohan Singh, who presided over the finance ministry after Mukherjee became the presidential candidate, also did the same – he talked about reversing the climate of pessimism and reviving “animal spirits”, and, in a matter of hours, put the GAAR on review.

The public’s powers of recall are short-lived. So what if Chidambaram collaborated in the underpricing of the 2G spectrum when he was last in the long office in North Block; the view in the corridors of power is that animal spirits are needed to r­evive “animal spirits”. As if Manmohan Singh’s hint was not enough, high on Chidambaram’s mind too was the imperative to signal to the markets that GAAR and the retrospective capital gains tax proposal are going to be shelved. But, importantly, while for Manmohan Singh the financing of infrastructure development was to be given the required thrust, for Chidambaram it is to be fiscal consolidation. After a meeting with D Subbarao, the governor of the Reserve Bank of India (RBI), the new finance minister hinted at a reduction of interest rates to stimulate investment and the demand for buy-now-pay-later consumer durables.

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