Stability returns to North Block

There is a nip in the air at Raisina Hill as autumn sets in.

The temperature inside the North Block headquarters of the ministry of finance has also dipped, but for different reasons.

With stability returning in the equity and currency markets, Finance Minister P Chidambaram and his officials seem confident of sailing through what earlier appeared to be a crisis.

The job of chief economic advisor has been vacant for over a month and the government doesn’t seem to be in a mood to fill it.

This might be an indication that comfort is returning to North Block on the economy. Economic Affairs Secretary Arvind Mayaram might continue to hold the additional charge and the mid-year analysis to be tabled in the winter session of Parliament might be prepared by the economic division under his supervision.

Raghuram Rajan, who relinquished the post of CEA last month to become the Reserve Bank of India governor, Mayaram and Additional Secretary K P Krishnan are the three key people in Chidambaram’s team.

They readied strategies to deal with the crisis when the rupee was hitting a new low almost daily and strongly defended the government in front of investors and the media.

The change is visible from the activity in North Block.

Meetings between the finance minister and the ministry brass, earlier held almost every day and also on holidays when the rupee was falling, have come down.

No more journalists are called regularly at short notice to attend a briefing by a North Block mandarin.

“The crisis seems behind us. “There was a time when the situation was changing every minute and there was a need to monitor it constantly, with several meetings in a day,” says a ministry official, who didn’t want to be identified.

Rajan’s role has changed but he is very much working with the government and the relationship between RBI headquarters in Mumbai and North Block seems to be improving.

Last week’s meeting between

Chidambaram and Rajan to give additional capital to the banks to stimulate demand in certain sectors could be only the beginning.

“As far as currency and equity markets are concerned, there is no immediate problem.

“Stability is returning.

“The current account deficit will be lower than our estimates.

“The fiscal deficit target is a red line.

Fed tapering is not likely before December.

“The only problem could be a prolonged US shutdown and failure to raise the debt ceiling,” says another ministry official.

While the CAD is likely to be below 3.7 per cent of gross domestic product this year, due to reduction in gold imports, the ministry will have to do some hard work on meeting its fiscal deficit target of 4.8 per cent.

Finance Secretary R S Gujral, shifted from revenue to the expenditure department by Chidambaram on taking charge last August, did the job well last year, by bringing the fiscal deficit even below the year’s budget estimate.

However, he is to retire next month.

The buzz in the ministry is whether he would be rewarded with an extension or pay the price for decisions as revenue secretary which had the blessings of then finance minister and now President Pranab Mukherjee.

The equation between Chidambaram and Mukherjee is no secret.

Gujral’s departure would mean revenue secretary Sumit Bose could become the finance secretary, as he is the seniormost among the four secretaries in the ministry.

However, with the country going for polls next year, the government is not likely to take any significant policy decisions.

The focus is now shifting from policy making to Budget numbers.

Although the government will table an interim Budget in February and the full Budget would come only in June-July, after formation of the new government, this month, the finance ministry will start working on revised estimates for this year and budget estimates for the next year.

However, apart from the budget division, interest in the elections has gripped other divisions of North Block.