A deep dive into political compulsions

Subhash Chandra Garg's We Also Make Policy stands out as an insider's account of how a key ministry functions, politically and administratively. Garg, an IAS officer, took voluntary retirement in 2019 after serving in various government positions, including a tumultuous tenure as Union Finance Secretary. His latest book provides a candid look into the functioning of the finance ministry, dissecting critical policies like electoral bonds, bank recapitalisation, its tussles with the RBI, and policies around “institutional issues” like cryptocurrencies, and participation in new global multilateral banks.

The book vividly narrates Garg's observations and emotions, during his 55-day stint in the ministry under the then-new Finance Minister Nirmala Sitharaman, and his eventual exit from the service. Garg does not shy away from critiquing or praising the officials and ministers he encountered. Notably, the late minister Arun Jaitley, under whose finance ministry Garg had spent much of his stint, earns much praise.

The book also touches upon each of the key challenges that the finance ministry faced during the author’s tenure there — be it the regulations of cryptocurrencies or disinvestments (or the lack of it, as the author conveys), the IL&FS market crisis, and the government’s interactions with SEBI. He has shared learnings from his experience at the Department of Economic Affairs, within the finance ministry. While most career bureaucrats do not put out their differences with their political bosses and even their fellow officers in public, and on record, this book with its references to differences in opinions with others, is a pageturner.

No smoke without fire?

Garg's relationship with RBI Governor Urjit Patel is marked by discord over the Central Bank’s Economic Capital Framework (ECF). His interest in this matter was ignited during his initial meeting as a member of the RBI's Central Board of Directors in August 2017 while serving as Economic Affairs Secretary. In one of these meetings, Patel is supposed to have stated that the ECF "would be reviewed only over his dead body." As economic conditions worsened in 2018 and communication between the finance ministry and RBI deteriorated, Prime Minister Modi convened a meeting, where he reportedly remarked that the RBI "could not be squatting on excess capital like a snake guarding a treasure."

Approximately a month and a half later, RBI Governor Patel resigned. Viral Acharya, too, left the RBI in July 2019, approximately six months before his three-year term concluded. Just a day after Acharya's departure from the RBI on July 23, 2019, Garg's transfer order to the power ministry was issued, occurring less than two months into Nirmala Sitharaman's term as finance minister. However, signs of impending changes were noticeable in early 2019, with Garg perceiving that Modi had "developed a certain coldness" towards him. As Garg puts it: "In terms of professional abilities and competence, I thought I was qualified to be the RBI governor. However, I also realised that I had been virtually at the forefront of the tussles between the RBI and the government in the past six months. As I was the face of the government, I was quite likely to be persona non grata for RBI management and staff."

While one could assume that this was a vociferous dissent put across by a bureaucrat, and dismiss it as sour grapes, the bold assertions do raise a point — “there is no smoke without fire”. 

The book raises pertinent questions about the role of government-nominated directors on regulatory institution boards. It prompts readers to ponder whether these directors merely endorse political decisions or possess the understanding and authority to grasp the nuances of techno-commercial discussions and take independent stances.

It offers a compelling account of the intricate interplay between bureaucracy, politics, and policymaking in India. Its prologue even describes in simple terms the connections and reporting lines of the various financial regulators with the finance ministry, and its onward interaction with other ministries, and the PMO! Garg's deep dive into economic history, policy choices, and political compulsions that steer policy framework makes this a thought-provoking read.

The reviewer is a policy researcher and a corporate advisor.