President Pranab Mukherjee has rejected all conjectures about playing a role in former Prime Minister Manmohan Singh’s ouster as the Reserve Bank of India (RBI) Governor in 1985, after the two had a difference of opinion over U.K.-based NRI Swraj Paul’s investments in India that triggered a three-year takeover battle for top firms such as DCM and Escorts.
In his book The Turbulent Years , Mr. Mukherjee indicates that the decision to move Dr. Singh to Planning Commission from the central bank was taken by then Prime Minister Rajiv Gandhi, whose Principal Secretary P.C. Alexander conveyed the decision to Dr. Singh.
“I had absolutely no role in Dr. Manmohan Singh’s departure from the RBI. By December 1985, (then) Prime Minister Rajiv Gandhi was firmly in the saddle and I was out of the Cabinet and the party,” he writes.
India’s finance minister for two three-year stints, from 1982 till 1984 and from 2009 till mid-2012 (under Dr. Singh as Prime Minister), Mr. Mukherjee countered Dr. Singh’s suggestion of “tension” between them when the latter led the RBI.
Dr. Singh’s daughter Daman Singh in her book Strictly Personal: Manmohan and Gursharan quotes him as saying he had serious disagreements with Mr. Mukherjee when he was the RBI Governor.
“Sometimes there was tension. For instance, there was that famous case of Swraj Paul’s investments,” Ms. Singh noted in her book.
“I never saw any differences with Dr. Singh. On the rare occasions they occurred, as anything other than legitimate exchanges of opinion over professional matters,” Mr Mukherjee wrote, stressing that the relationship between a finance minister and an RBI governor is “complex.” “Both need to work together, but it is impossible that they be of one mind on all issues. It is for the RBI to give its view, but the government can always overrule it,” Mr. Mukherjee wrote, pointing out that ultimately, the issue was resolved after the government gave a direction to the central bank.
The president cited Dr. Singh’s own words on the issue as proof: “This was a government scheme. The RBI was only an agent for its implementation. And we would respect the intention of the government.”
The trigger for the disagreement between the two was the portfolio investment scheme for NRIs introduced in Mr. Mukherjee’s 1982-83 budget, which he averred was a ‘forerunner to the much wider liberalisation measures initiated’ by PV Narasimha Rao and Dr. Singh in the early 1990s.
The scheme pioneered NRI investment in India, which was subsequently expanded by successive governments, the president asserted.
“However, little did I realise that the scheme contained in the Budget proposal would soon turn into a three-year-long battle between UK-based NRI Swraj Paul and two of Delhi’s leading companies — DCM and Escorts,” he said.
The issue, which led to charges against the government for supporting hostile takeovers by Mr. Paul, was finally resolved in early 1986 after a mediation led by top PMO officials, finance secretary S Venkitaramanan and Minister of State for Defence Arun Singh. Mr. Paul was persuaded to sell his shares back to the Shri Rams (of DCM) and the Nandas (of Escorts) at a mutually agreed price.
Interestingly, while Mr. Mukherjee refers to Mr. Rao as “a good team leader,” he said Dr. Singh was “an able associate” though he is kinder about him elsewhere when he talks about Mr. Rao’s biggest achievement — spearheading the economic reforms of 1991.
“Faced with an unprecedented financial crisis, PV (Rao) eschewed the usual practice of appointing a senior political leader as Finance Minister. Instead, with great foresight, he chose Dr. Manmohan Singh…then gave him full freedom to navigate the financial crisis and introduce far-reaching changes that have made India the economic powerhouse it is today,” he wrote.
“PV, Manmohan Singh and I worked as a team. Dr. Singh focused on the countries from which we could attract investments while I worked on relations with our traditional partners, the NAM and other developing countries,” Mr. Mukherjee wrote about the period following the economic reforms of 1991.