Economic, financial and governance reforms and investment stimulating measures which India needs to overcome current slowdown durably and to build $10 trillion dollar economy

A New Beginning: From the IAS to Economy & Finance Policy

Subhash Chandra Garg

Today, I leave the Indian Administrative Service (IAS) after completing a highly satisfying public service for over 36 years. The IAS provided me unrivalled space and opportunity to administer programmes for public benefit and economic development, to manage public enterprises, and advise on several economy wide policy issues, in agriculture, industries, services and macro-economic and financial management of the country, sometimes participating in making policy as well. Now, I move on to work at a still wider canvass and to do more rewarding and satisfying work in economic and financial policy space, working with think tanks, real and private sector enterprises and public and academic policy crafters and makers in the larger economic world, including infrastructure, financial and digital economy sectors. I am looking forward to this transition.

Incredibly Satisfying Journey in the IAS

The IAS provided me unparalleled opportunity to work at all levels of public institutions- villages, tehsils, sub-divisional headquarter, district, state, national and international. Working as the Sub-Divisional Magistrate of Chittorgarh during 1985-87 solving land disputes of farmers, providing relief during natural disasters (also promoting family planning) and resolving diverse set of people’s problems at the local level, including founding the first urban settlement of nomadic tribe- Gadia Luhars, was highly satisfying. It was as satisfying as the experience in the World Bank Group during 2014-2017 as India’s first Executive Director at Additional Secretary level, dealing with global development and financial policy issues, considering and financing specific poverty alleviation and development projects, and also funding private sector enterprises all over the World- Africa, South Asia, Latin America and the Middle East having wider development effect.

I came in the Service from a Finance and Accounts educational background. I was fortunate to top the Intermediate examination of the Institute of Cost and Works Accountants of India (known as Institute of Cost and Management Accountants now) and Final examination of the Institute of Companies Secretaries of India. I wanted to work in the Finance Departments, Institutions and Organisations in the State of Rajasthan, my Cadre, and also nationally and internationally. I got more opportunities than I could have possibly wished for. I supervised and managed the Registration and Stamps Department. Also, I managed life insurance, provident fund and medical insurance portfolios of over 6 lakh state government employees in the State Insurance and Provident Fund Department.  Later, I was appointed the Secretary In charge of the Expenditure and Budget of the State of Rajasthan. String of these posting, finally topped up as Principal Finance Secretary of the State twice (both times close of 9 months each), gave me an excellent opportunity to see all facets of state finances.

Opportunities I got in the Government of India in financial management were more strategic and wider in its scope and for larger fiscal and financial development of the country. I joined Ministry of Finance as a Director in the Department of Economic Affairs and went on to head the State Finances wing of the Department of Expenditure as Joint Secretary. On my return from the World Bank, I took charge as the Secretary of the Department of Economic Affairs. My total tenure in the Ministry of Finance spanned over 7 years, culminating finally in being designated as the Finance Secretary of the Union of India, though it turned out to be short- only five months. I could have served possibly for the longest term for a Finance Secretary (for an IAS officer) if I had held on to it till my normal date of superannuation in October 2020.

Working in the Government of India as Joint Secretary (Plan Finance I/ State Finances) in the Ministry of Finance was quite enriching in terms of the exposure I got in managing fiscal finances of both the Central Government and the State Government. Likewise interactions, both as Director (Fund-Bank) and later as Secretary in DEA, with multi-lateral and international organisations helped me acquire excellent knowledge and play a part in global deliberations and decision making. This included a role in global policy making (G-20), global monetary and financial stability management (IMF) and development financing (World Bank Group, Asian Development Bank (ADB). Development financing experience got more enriching in newly minted developing countries owned development finance institutions like Asian Infrastructure Investment Bank (AIIB) and New Development Bank (NDB). Multilateral institutions I worked with included agriculture and rural development finance focussed organisations like International Fund for Agriculture Development (IFAD), and environment financing organisations like Global Environment Facility (GEF) and Green Climate Fund (GCF). I participated in decision making of these organisations as Alternate Governor- sometimes representing India as the Minister of Finance. Biggest satisfaction I drew, as the Secretary Economic Affairs, was in formulating national budgets, managing currency, building capital markets and developing instruments for financing infrastructure and attracting foreign investments. Nurturing nascent National Infrastructure Investment Fund (NIIF), Government’s first infrastructure equity investment vehicle organised as Alternative Investment Fund (AIF), provided special satisfaction.

I dealt with several sectors, during my service life, which produce goods and services to make up what we measure as Gross Domestic Product (GDP). It is only in the Indian Administrative Service one can expect to get such a comprehensive experience of working for India’s economic development, including implementing and shaping up policies which affect national value added/ output and incomes.

I got excellent exposure to the agriculture sector as Chief Executive of Soybeans Project, Director Agriculture of the State of Rajasthan and later as Joint Secretary in the Ministry of Agriculture. As Joint Secretary I was in charge of implementing major programme of Rashtriya Krishi Vikas Yojana (RKVY), as well as leading the Trade Division responsible for agriculture negotiations in the WTO international trade. Assignment of Special Secretary Education gave me strategic perspective of the education sector in all its dimensions- elementary, secondary, tertiary, Sanskrit and technical. Managing edible oil processing plants as Chief Executive of Kota Soybeans Processing Plant and later as Managing Director of Rajasthan Oilseeds Growers Federation exposed me to cooperative processing sector and industrial sector. Running Rajasthan Roadways, albeit for a short period, provided some understanding of transportation sector.

I got a good exposure to the entire spectrum of energy sector working at multiple levels, including Chief Executive of Rajasthan Energy Development Agency which focussed on promotion of renewables, Managing Director of Rajasthan Power Corporation, which set up first wind generation plant of Rajasthan, Special Secretary Energy (during unbundling of Rajasthan State Electricity Board into separate generation, transmission and distribution utilities) and finally overseeing the sector from the top as the Secretary Power in the Government of India.

Tried to be a true civil servant

I am thankful to the Government of India and the Government of Rajasthan for giving me so many excellent opportunities to do enormously rewarding work and gaining vital experience. Prime Minister Modi and present Principal Secretary to Prime Minister selected me for the position of India’s Executive Director in the World Bank as well as the Secretary of Economic Affairs. I am thankful to both of them. I must also acknowledge fair-mindedness and generosity of most of my bosses who were quite large hearted and always rated me outstandingly despite me stepping on their toes many a times and possibly over-reaching the limits a civil servant is normally supposed to act within.

I am quite an independent minded officer. I have always carried out my responsibilities professionally and independently keeping the larger public interest as the sole criterion for making decisions. I never asked for any specific posting in my entire career in the IAS either at the State or at the National level. I have never shied away from taking decisions testing the borders of rules and regulations, if it is right decision and is in the public interest. I was able to take and implement bold and sometime unconventional decisions throughout my career, which might not have kept my bosses in good humour sometimes.

It is not that I was immune to the consequences of my independent and unconventional ways of functioning. It might be a little strange, but all my postings as Chief of Finance Departments in the State and at the Centre ended little bit unceremoniously. In December 2008, I was shifted from the position of Principal Secretary Finance Rajasthan the day the new Government took over and was made Commissioner of Bureau of Investment, a position of much smaller responsibility. Again, when my services were offered as Executive Director to the World Bank by the Union Government in 2014, without my asking for it, the then Chief Minister of Rajasthan felt so offended that I was relieved of my duties as Principal Secretary Finance on the day my prospective appointment orders were issued and had to cool my heals for about one and a half month as Officer on Special Duties in Government of India. The shift in July 2019 from the Department of Economic Affairs to the Ministry of Power as Secretary did attract wider media attention as well. There were several other such instances, when I was transferred to what some people refer to as ‘punishment’ posting. I must, however, say almost all of these ‘punishment’ postings provided me great opportunities to learn, do good work and widen my knowledge base. One must evaluate the opportunity, experience and treatment one gets as an IAS officer in his/her career as a whole. From that metric, I must say I could not have had a better package of postings. I derived the greatest possible satisfaction from my thirty-six years in the Service.

While I would remain grateful eternally for what I got to do in the Service, I am leaving it now- one year before my normal date of superannuation- to embark on, what I would like to believe, would be an extremely satisfying, fulfilling and rewarding journey.

Exciting Goal of Making India a $10 trillion economy by early 2030s

The goal to make India a $10 trillion dollar economy by early 2030s excites and inspires me. This would require a fundamental transformation of the economic policy making and governance in the country. This would also require millions of businesses to bloom in the country and produce the goods and services needed to meet the consumption and investments needs of a growing India and for exporting to the rest of the World to satisfy the wants of global community. GDP is the aggregate of all the value added in the form of production of goods and services which the businesses produce. Achieving this goal would require participation of all the working age population- male and female- with the requisite skills, knowledge and technology, at their productive best. I want to be part of this exciting transformation and the journey.

It seems to me that the policy makers should look at this Goal from a businessperson’s perspective. A businessperson would invest capital in an enterprise only if (s)he sees demand for its produce and there is opportunity to earn profit (income). The demand for final products (consumption) arises only from the people’s existing earnings and their confidence about their future incomes. People, as consumers, are willing to borrow or take credit for buying goods (house, cars, consumer durables etc.) based on the expectations of their future incomes. If people are not optimistic of their incomes exceeding their consumption requirement, they would not take credit. Likewise, if the businesspersons are not optimistic of earning a decent return on their investments, they would not invest in new manufacturing capacities, building infrastructure or establishing service companies. I would like to work to use this perspective and framework for developing appropriate policy proposals.

There is another way we can look at the $10 trillion GDP goal. GDP is nothing but the aggregate of all the value added in the economy. All the value added, minus the interest paid for the credit and taxes paid to the Government, is primarily shared between the two principal factors of production, the ‘workers’ (everyone from the manual workers to top technologists are workers in economic terms) and the entrepreneurs with risk capital, the ‘capital’. The value added also equals all the consumption (including by the rest of the world as net exports). Those goods and services which are produced but not consumed results in no income to the factors of production. Looking at the entire economy with its GDP as a gigantic flow of production of goods and services (the value added) satisfying demand of consumers (the consumption) culminating in incomes of workers and entrepreneurs can provide vital insights for policy making and also building appropriate governance structures in the country. Looked at from this broad policy making framework, a lot of policy changes would be required in India.

Achieving this Goal would require fundamental changes in Economic and Financial Policy making and Governance

There is very little investment taking place presently in India’s infrastructure businesses, despite this being her biggest opportunity. There is an enormous unmet demand in housing, roads, airports, railways, energy, irrigation, in almost every infrastructure segment. Yet, investment in infrastructure has got almost stalled. Businesses do not see opportunities in several infrastructure sectors for the present. If a four-lane national highway gets constructed at Rs. 25 crore a kilometre in India and generates less than a crore of rupees as toll revenues a year, no businessperson would make investment in such road projects. Consequently, there is practically no BOT/BOOT project in India for quite some time. If the power generated in a power plant is not paid for or the coal for producing power is not allocated, the entrepreneurs are left with no funds to service their creditors and earn no return on their investments, no one will invest in power generation. The struggle of IPPs in gas, coal and now even in the renewable power generation to survive and projects of over 50000 MW becoming non-performing loans is explained by this fundamental business problem, compounded by policy. If the revenues coming from telecom services provided are too inadequate to pay for the investment made in the network established and the wages of the workers employed, the telecom business would only end up in the bankruptcy courts. Most of the infrastructure businesses in the country are currently in such dire-straits. A lot of policy action is needed to energise the investors in making investments in the infrastructure sector.

The departmental undertakings and the public sector undertakings, unless operating at fully commercial enterprises, generate much less value added compared to their counterpart businesses in the private sector. Lesser value- added means lesser amount available for workers and as profits for further investments. Lesser value added in such enterprises means lesser GDP and lesser growth for the country. For building a $10 trillion economy, India would need to leave behind the command control socialistic economy, which has led to building of so many loss making and sub-optimal returns generating businesses in the country. There is a need to aggressively privatise the public sector and build a financial system where the national and global companies can develop the most modern and efficient infrastructure and set up manufacturing and service enterprises in the country. Reinventing and re-organising the Government would need to be a significant part of the policy reforms for building the $10 trillion economy by the early 2030s. As part of these reforms, the Ministries and Departments, whichever are required to be retained, would also have to be restructured and re-focussed on their role in promoting value added in their respective sectors and the profitability of the private enterprises.

Technologies of production of goods and services are changing rapidly. Automation and digitisation of production and distribution processes would require major policy support in the country. The lack of automation and adoption of digital technologies in agriculture, MSMEs and other enterprises of the country make these enterprises less competitive. Higher cost of power, finance and taxes in the country also contribute in a major way in making our industries non-competitive. A completely different way of making our agriculture, industry and services competitive in the world would have to be found and mainstreamed if we really want to achieve the goal of $10 trillion economy. Most of the Government policies and programmes presently delivering distribution and subsidy support to farmers and labour, to industrial and service enterprises, including in MSME sector, and allocation of land resources for building manufacturing and infrastructure would need to be reformed and targeted.

What do I want to contribute in achieving this Goal

I want to contribute towards achieving the national goal by crafting and promoting appropriate economic and financial policies and refining the principles, approach and the framework outlined above.

India has a number of excellent think-tanks. In the economic and financial policy space, however, no single institution deals comprehensively with the complete spectrum of macro-economic policies, sectoral policies and the financial policies issues outlined above. I hope to lay the foundation of an Economic and Financial Policy think-tank focussed on this comprehensive and integrating role. I intend to establish a Foundation, contributing a part of my pension resources for establishing such an Indian Economic and Financial Policy think-tank. I look forward to work with the institutions which are presently focussing on any aspect of this wider policy agenda.

I visualise myself as a policy analyst, a policy craftsman and strategist and an advocate for developing right kind of economic and financial policy framework for India achieving the goal of becoming a $10 trillion economy. As GDP is the sum of all the value added by the businesses in India, one can visualise India’s economy and businesses as Indian Economy & Businesses Incorporated. Further, as the principal parameter/goal of the economic and financial policy work is to raise the output and profitability of this Indian Economy & Businesses Incorporated, I envisage me working as its Policy Strategist and Craftsman.

Today, I bid good-bye to the Indian Administrative Service with tremendous sense of satisfaction and gratitude. I now enter into the vast world of economic and financial policy making to build and nurture businesses to begin a new exciting phase of life.