The outsider in the system

Last Updated: Wed, Oct 24, 2012 20:52 hrs

What stands out in Javid Chowdhury’s autobiographical account of his life as a civil servant is his angst and mild bitterness about governance in general and, more particularly, the manner in which economic liberalisation took place after the 1990-91 crisis. Clearly, Mr Chowdhury’s mindset is different from that of those who ran economic policy while he was in the finance ministry — heading a directorate responsible for the enforcement of foreign exchange laws and, later, as revenue secretary.

He makes no bones about his dislike of the “tsars of economy policy” in government. He does not name them specifically, but you can easily guess who these people may be from the many incidents he recounts. Montek Singh Ahluwalia will easily top that list. Vijay L Kelkar and N K Singh also figure in that list of the tsars with whom Chowdhury could not see eye-to-eye on economic policies. Chowdhury is no fence-sitter. You may not always agree with his assessment of Messrs Ahluwalia, Kelkar or Singh, but his frank views on people and policies display a quality that is increasingly becoming rare among civil servants.

Mr Chowdhury reserves his most critical comments for Mr Ahluwalia. Recounting the finance ministry’s comments on the securities scam in the early 1990s before the Joint Parliamentary Committee (JPC) probing charges of financial irregularities, Mr Chowdhury says the performance of Mr Ahluwalia, then the economic affairs secretary, was “that of an excellent advocate with a very weak brief”. It was clear that Mr Ahluwalia’s explanation that the securities scam was an outcome of a systemic failure did not impress Mr Chowdhury, then in the enforcement directorate. Worse, the JPC proceedings, according to him, showed how the government “brazenly” defended “illegalities in the universe of securities and banks”.

It is here that Mr Chowdhury gives you a clue as to why he may have disliked the tsars of economic policy. This is how he sums up Mr Ahluwalia’s long lecture before the JPC: “There was not the slightest tinge of introspection or remorse — there was only an absolute confidence of talking one’s way out of the crisis. The attitude was that if laws had been violated, the laws were wrong — because they understood economics, and therefore what they say should be the law.” And systemic failure became a “ready alibi for any otherwise indefensible action in the decades that followed”.

Mr Ahluwalia figures again when the author writes about the irregularities over foreign exchange transactions relating to Indo-Russian rouble-rupee trade. As enforcement director, Mr Chowdhury’s team had investigated the misuse of the vostro accounts maintained by some banks, including a few branches of well-known foreign banks. However, just before officials of these banks could be charge-sheeted, the matter was taken up by the finance minister (who else but Dr Manmohan Singh!), who quickly convened a meeting. Significantly, Mr Chowdhury writes, the revenue secretary at that time, M R Sivaraman, did not attend that meeting citing some other important engagement, and Mr Ahluwalia questioned the advisability of proceeding with the charge-sheets since they would be bad for investment and shake up the corporate world. Mr Chowdhury fought a gallant battle and emerged victorious in the end, getting even a rare comment from Dr Singh that suggested that he was not happy with the way the finance secretary had dealt with the matter.

Mr Chowdhury also makes it clear that he was extremely uncomfortable with the reforms process, although he does not single out anything substantive or specific as problematic. He saw “an uncritical liberalizer” in Vijay Kelkar, with whom he worked as additional secretary in the petroleum ministry. “Privatization fever” was raging in the government in 1995-96 and was getting a fillip under Mr Kelkar.

N K Singh, another tsar of economic policy, surfaces in these memoirs in a rather strange episode — as secretary in the Prime Minister’s Office when Atal Bihari Vajpayee was PM. Mr Vajpayee had decided to remove the ban on production of non-iodised salt on the basis of a petition made by some Gandhians. However, as Mr Chowdhury learnt as the health secretary, Mr Singh had not conveyed that decision to the health ministry since he knew the decision would have wide-ranging public health implications. Mr Chowdhury’s explanation of why Mr Singh took no action is significant: “While NK could gift away Rashtrapati Bhawan if he was in the mood, he would be canny enough to know the public cost of that generosity…Public loss with no corresponding private gain was a proposition NK could not rationalize”. Later, the PM realised what must have happened and called Mr Chowdhury personally and directed him to remove the ban!

A recurring theme is a sense of hurt and disappointment that Mr Chowdhury fails to conceal in recounting how the reform process dismantled the earlier policy regime. He presents himself as a bewildered bureaucrat who was “always told we were reforming, but no one had a clue about the macro-plan or the reason.” As someone who headed the enforcement directorate, his main grievance was that the “tsars of the economy” wanted the foreign exchange regulations to be made toothless. He resents the campaign that the foreign exchange regulation act had to be repealed and replaced with the foreign exchange management act, as the earlier law was only an instrument for harassment. “However, the impression given, that high-profile corporates were routinely and falsely targeted, is sheer fiction,” Mr Chowdhury declares. This lacks conviction as elsewhere in the memoirs, he narrates how the directorate was prone to misuse by politicians and ministers to meet political objectives.

Mr Chowdhury describes his memoirs as an insider’s view. But his disappointment with the way the Foreign Exchange Regulation Act was diluted and how double-tax avoidance agreements became the conduit for tax evasion shows that he largely remained an outsider in the system — at a time when much of India’s economic policies were changed. The Insider’s View is testimony to that disconnect.


Javid Chowdhury
Penguin Viking
310 pages; Rs 499

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