Refugee Roots Make India Finance Minister a Careful SpenderUnni Krishnan
To some friends who’ve known Arun Jaitley for decades, the man now in charge of India’s purse strings doesn’t throw around money lightly.
Jaitley, 61, pledged to tackle the budget deficit after he was appointed as finance minister yesterday following Prime Minister Narendra Modi’s landslide election win this month. Jaitley got the post even after losing a seat he contested in Punjab province, near the border of Pakistan, where his parents lived before moving to India after partition in 1947.
“Arun would be careful about spending money -- it’s more to do with his Punjabi refugee roots,” Ashok Rai, one of Jaitley’s classmates who has known him for four decades and spent time on the campaign trail with him, said last week. “If Arun had 100 rupees, he’d only spend 20.”
That frugality stands to serve him well as investors look to Jaitley to straighten out India’s finances, revive growth and stem the second-fastest inflation in Asia. Reserve Bank of India Governor Raghuram Rajan has called for the government to impose fiscal discipline as he keeps interest rates elevated to stem consumer-price gains exceeding 8 percent.
“Jaitley is a good choice -- he is articulate and well-versed with quite a few issues,” said Rajeev Malik, an economist at CLSA Asia-Pacific Markets in Singapore. “As the finance minister the most important thing is to come up with a credible plan for good quality fiscal correction, which in turn will have a positive impact on inflation and also free up resources for financing growth.”
Jaitley in February criticized his predecessor Palaniappan Chidambaram for fiscal laxity over the interim budget in effect for several months. The reduction of India’s fiscal deficit to 4.6 percent of gross domestic product in the year ended March 31 was achieved through cutting capital expenditure instead of boosting revenues or reviving investment, Jaitley said.
“Will the Finance Minister seriously introspect on the legacy he would leave behind for the next Finance Minister?” Jaitley wrote in the Feb. 17 blog post published by The Times of India. “The Finance Minister will be a relieved man today. His successor will be in trouble.”
Jaitley, who will also head the ministries of defense and corporate affairs, yesterday said he’d present a budget some time in July. He also discussed growth and inflation with Rajan, who has raised the benchmark interest rate three times to 8 percent since taking office last year.
In an April 22 interview, Jaitley said “present circumstances” may be guiding the central bank’s policies even while calling for lower borrowing costs.
“Higher rates are making the economy sluggish and a competitive economy cannot afford them,” Jaitley said.
As a boy, Jaitley grew in a household with parents who were among migrants from Pakistan that moved to India when Punjab was divided during partition. Many in the community lost all their belongings overnight when the nations were split.
While in university, Jaitley headed his student union while studying to be a lawyer. He was also a leader of the youth wing of the Rashtriya Swayamsevak Sangh, a Hindu nationalist group aligned with Modi’s Bharatiya Janata Party.
From 1975 to 1977, Jaitley was detained for opposing emergency rule imposed by former Prime Minister Indira Gandhi’s Congress party. Three years later, he joined the BJP at its inception while continuing with his law practice.
Jaitley has represented multinationals in legal cases, counseling PepsiCo Inc. when it took Coca-Cola Co. to court, and then again when the company was fined for painting advertisements onto rocks in the Himalayan range. He later represented Coca-Cola, and has also appeared for the billionaire Birla family in an inheritance dispute.
Jaitley is now the richest member of India’s cabinet with 1.1 billion rupees ($19 million) in total assets, according to an analysis of public disclosures from ministers by the Association of Democratic Reforms and National Election Watch, New Delhi-based advocacy groups.
Jaitley held a number of positions during the BJP-led governments from 1998 to 2004, including commerce minister. As leader of India’s delegation at the World Trade Organization talks in 2003, he helped block moves by developed countries to gain more access to emerging markets without reducing agricultural subsidies.
“His economic ideology is right of center,” said D.H. Pai Panandiker, president of the RPG Foundation, a New Delhi-based research group. “He understands the urgency of reversing the growth slowdown and changing the sentiment.”
Growth in Asia’s third-largest economy is near the slowest pace in a decade, while elevated inflation erodes incomes of nearly 800 million Indians who live on less than $2 a day. Projects valued at $255 billion -- about the size of Greece’s economy -- have been stalled due to lack of clearances ranging from environment, fuel linkages to land acquisition.
Optimism about the new government’s policies has fueled a 2.2 percent rally in the rupee this month, the best performance in Asia, while the benchmark S&P BSE Sensex index hit a record high on the day Modi was sworn in.
Modi’s BJP won 282 of 543 seats in the election, the first time a single party has won a parliamentary majority in India since 1984. The scope of the win has boosted bets the new administration will be able to take politically sensitive decisions such as raising fuel prices, a move that would reduce subsidies and help narrow the budget deficit.
While Jaitley lost his contest in Punjab, he made it to the cabinet because he’s a member of parliament’s upper house. Since 2002, he has become one of Modi’s key strategists while helping to oversee election wins in his home state of Gujarat.
Jaitley has also been one of Modi’s top defenders, telling international journalists in March that he doesn’t need to apologize for failing to quell 2002 anti-Muslim riots in the state because courts have cleared him.
To his friends, loyalty is a key attribute of Jaitley, whom Rai described as a sharp debater who never forgets a name. Jaitley never shies away from helping his friends, Rai said, whether it be assisting with overdue debts or turning up to represent them in legal disputes without taking any fees.
“If you go to him with any problem, he is there to help,” Rai said of Jaitley. “He takes care of his friends.”