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Jaswant, a man of his word

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January 10, 2004 17:59 IST

Whatever one may think of Jaswant Singh as finance minister, this much can be said of him: unlike his predecessor, he doesn't say much, but what little he says should be taken very seriously because he is certainly a man of his word.

When he came into the finance ministry less than two years ago as a relative newcomer to the world of finance, he made two promises: he would seek to increase not GDP so much as what he called the gross national contentment.

He also said he would try and put more money in people's pockets. He has done both, and how! He said a third thing too: economists should keep away from the finance ministry, because there are 'men at work'.

We now know what he meant: there was a political job to be done in the ministry in terms of winning back the middle class, and he has done it with a confidence that is its own armour against purist criticism.

First came the successive drops in interest rates last year, which led to the sharp surge in stock prices as fixed-interest outlets for money became unattractive.

The lowering of interest rates also encouraged the surge in consumption, as housing loans became more affordable and as people could buy consumer durables with cheaper bank and credit card debt.

These factors have contributed enormously to the feel-good factor that now dominates public discourse. One could argue that GDP growth is no better than on past occasions when the economy was bouncing back after a drought, and argue further that industrial growth is still at a relatively modest 6 per cent. But the prevailing mood has made these sound like quibbles, matters of detail that should not spoil the party.

But that isn't all. The minister promised to put more money in people's pockets, and here he has had the swing in the business cycle on his side.

As companies have increased profits (partly on account of the lower interest rates), and as sales charts have moved up because of consumer spending, salary increases have got more generous and dividend payments have improved smartly.

But more importantly, the near-perfect monsoon in 2003 has brought in one bumper harvest, with a second one to follow when the rabi crop comes in. These have certainly put much more money in people's pockets.

To this could be added the fact that there is a runaway increase in the government's subsidy bill, and this money too is going to people and to companies. All in all, Mr Singh has been as good as his word -- especially now that he has announced the largest tax giveaway in recent memory, with sharp cuts in duties for all those who have a little money to spare (translated as the middle class).

And in case anyone should fail to note these huge swings in the popular mood, the finance minister has taken the quite unprecedented step of launching his very own advertising campaign. The "India Shining" slogan has already gone into the popular lexicon; even more noteworthy is the fact that it accurately reflects the popular mood.

Again, the critics could argue that there is a lot of work to be done on everything from developing quality infrastructure to delivering plain old governance, but it's the critics who are out of sync with the general mood, which asserts that India has arrived.

To the extent that even Keynes recognised the importance of "animal spirits" in engineering a revival, there is something to be said for generating a mood of over-all confidence, so that consumers consume and investors invest and thereby build the economic tempo.

The economists might point out that George W Bush has gone down this road before, in that he has used tax giveaways to engineer a revival, but that he has in the process converted a massive fiscal surplus into an even more massive fiscal deficit.

Here Jaswant Singh has the good fortune of an economy that is already on the upswing -- yielding the revenue buoyancy that allows for pre-poll bonanzas. So, while he has delivered what he promised, he seems to have that additional quality that Napoleon looked for in his generals: luck.

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