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AT 11.01 AM ON 5 JULY 2019, amid the thumping of desks in the treasury benches, Nirmala Sitharaman rose to her feet in the Lok Sabha to deliver her maiden budget speech. It was only the second time that a woman had done so—Indira Gandhi presented the budget in 1970, during her first term as prime minister. While preparing for this historic occasion, Sitharaman had sought the blessings of two of her predecessors: an ailing Arun Jaitley, whom she would describe in an obituary the following month as “my guru, my mentor, my moral strength,” and Manmohan Singh, whose budget speech in July 1991 had begun an era of reforms that, she assured parliament, would see India “become a $3 trillion economy in the current year” and reach “$5 trillion in the next few years.”
Sitharaman had carried the budget documents to parliament in a bahi khata—a traditional ledger wrapped in a red cloth—instead of the red briefcases preferred by her predecessors, mimicking the ministerial dispatch boxes of the British government. Krishnamurthy Subramanian, the chief economic advisor at the time, told the media that this choice symbolised “our departure from slavery to Western thought.” Sitharaman later explained that the subtle message behind the choice was that the Narendra Modi government “does not indulge in a culture of exchanging suitcases”—in other words, bribery.
“The recent election, which brought us to this august house today, was charged with brimming hope and desire for a bright and stable new India,” Sitharaman began, referring to the general election that had returned her Bharatiya Janata Party to power, two months earlier, with an even larger mandate than in 2014. “The people of India have validated the two goals of our country’s future: that of national security and economic growth.”
By the time she ended her 137-minute speech, however, the stock markets had tanked. The Bombay Stock Exchange’s headline index, the Sensex, fell by about one percent that day and by almost ten percent over the next month. Instead of announcing a stimulus package that corporations had been expecting in the wake of Modi’s re-election, Sitharaman had increased the income tax surcharge on those earning more than R2 crore a year, introduced a tax on rich foreign funds, retained a capital-gains tax that had been unpopular among investors, kept the country’s largest companies out of the ambit of a corporate tax cut and raised duties on several goods. Moreover, there were no major announcements on how the government would respond to a major crisis in demand that economists and industrialists held responsible for slowing growth.
“The slowdown in the economy has become pervasive and broad-based,” Pankaj Murarka, the founder of Renaissance Investment Managers, told BloombergQuint on 8 July, after the stock exchanges registered their largest single-day decline of 2019. “The markets were expecting some radical ideas from the budget for growth revival. But the budget has been more incrementalist than radical.” Opposition leaders were more scathing. P Chidambaram, a former finance minister from the Congress, called the budget “insipid,” while the chief minister of West Bengal, Mamata Banerjee, called it “completely visionless.”
SITHARAMAN WAS SWORN IN as India’s eighteenth finance minister, on 30 May 2019, with the economy in a precarious state. In January that year, I had reported for Business Standard that, according to the latest Periodic Labour Force Survey—whose results the Modi government was refusing to release, triggering the resignation of two members of the National Statistical Commission—the unemployment rate was the highest it had been in half a century. A day after Sitharaman took office, the government released the PLFS data, confirming the figures that had been leaked to me. It also released official GDP figures, revealing that the January–March quarter had seen the slowest growth rate since Modi’s arrival as prime minister.
The PLFS was not the only dataset the government had been suppressing. Six months later, I reported that another survey, which had been scheduled for publication in June, revealed that consumer spending—including expenditure on food—had fallen for the first time since the global oil crisis of 1972–73. The government decided to not release the quinquennial survey, which it uses to estimate poverty and inequality, because of “data quality issues,” even though a subcommittee appointed to look into the findings had found no defects.
The twin shocks of demonetisation and the goods-and-services tax had had a crippling effect on the country’s unorganised sector, which accounts for about half of India’s GDP and over four-fifths of employment. The small businesses that constitute the sector—around half of which are self-employed individuals—primarily dealt in cash, so the November 2016 decision to declare invalid over eighty percent of the cash in circulation, necessitating long queues at banks for weeks, led to unprecedented job losses, withheld wages and lost savings. The introduction of the GST, in July 2017, meant that many of these businesses either faced a decline in profits or lost contracts to the organised sector, which was better placed to digitise business transactions and comply with the new tax regime.
Despite these crises, as well as a stagnant investment rate and a banking sector struggling to cope with trillions of rupees in bad loans, business leaders were wary of criticising the Modi government, especially with Sitharaman helming economic policy. A month after demonetisation was announced, Sitharaman, who was the commerce minister at the time, had called an industrialist who had spoken out about the impact it would have on the economy. “Sitharaman tends to get upset with any direct criticism of the government and, after her call, I had to go and meet her,” the industrialist told me, on condition of anonymity. “She told me, ‘How can we work together if you criticise our policy?’”
“Sitharaman tends to get upset with any direct criticism of the government,” the industrialist said. “She told me, ‘How can we work together if you criticise our policy?’”
Within a few days, he started issuing statements hailing demonetisation. “The government, in general, does not like free and open exchange, except in a small setting,” he told me. “But the good part about Sitharaman is you know where you stand with her. If she doesn’t approve of something, you would know, unlike how other politicians may tend to act in a more diplomatic manner.” Sitharaman’s office did not respond to my repeated requests for an interview or to a questionnaire I sent.
At the India Today Budget Roundtable on 8 July 2019, even as the Sensex fell by two percent that day, the billionaire Sanjiv Goenka heaped praise on the budget. “I would like to start by saying that, in so many years that I have been working, I haven’t seen so much intellectual thought going into any one single budget,” he said. The otherwise reserved Sitharaman grinned.
At an event organised that December by the Economic Times, however, another billionaire, Rahul Bajaj, spoke out about “an environment of fear” for industrialists. “You are doing good work,” he told Sitharaman and her fellow cabinet ministers Amit Shah and Piyush Goyal, “and, despite that, we don’t have the confidence that you’ll appreciate criticism.” Shah responded that the fact that Bajaj could ask such a question meant that no one would believe that people were scared—even though Bajaj had already faced consequences for criticising Modi. In 2003, at an event organised by the Confederation of Indian Industry, he was among a number of businessmen to speak out against anti-Muslim pogroms in Gujarat the previous year. The Gujarat government, headed by Modi, responded by restricting the CII’s access to it and patronising a rival industry group instead.
The day after the Economic Times event, Bajaj faced a barrage of criticism from the government and its supporters. “Questions/criticisms are heard and always answered/addressed,” Sitharaman tweeted. “Always a better way to seek an answer than spreading one’s own impressions which, on gaining traction, can hurt national interest.” She addressed the incident while speaking in parliament as well, echoing Shah’s response. “I have gone around the country where people, both in the social media and in my face, have told me, ‘Oh my god, you are the worst finance minister we have seen’—not even waiting for six full months,” she said. “I have neither said anything to them, nor have I responded in an acceptable way. On the contrary, I said, ‘Please give me more ideas, we will work on it.’”
INSTEAD OF REVIVING a beleaguered economy with fresh ideas, Sitharaman emulated Modi’s other finance ministers by remaining in a state of denial. An analysis by the Economic Times noted that the 2019–20 budget was “devoid of any landmark announcement to engineer a directional shift in our nation’s economic trajectory.” Instead, it was “a political document that is well in sync with the ruling BJP’s belief that elections are an ongoing game.”
The budget has always been a campaign tool, but the Modi government has often employed it in service of the prime minister’s cult of personality. Over the ten budgets since Modi came to power, I found, his finance ministers have mentioned him over fifty times. In her 2021 budget speech, Sitharaman—whose political success has depended upon her absolute loyalty to Modi—mentioned the prime minister 13 times. This broke the previous record of 11 mentions in a single speech, set by Rajiv Gandhi’s finance minister ND Tiwari in 1988. Jawaharlal Nehru and Indira Gandhi were referenced only thrice each in all the budget speeches across their tenures as prime minister, and almost never by name.
Instead of reviving a beleaguered economy with fresh ideas, Sitharaman emulated Modi’s other finance ministers by remaining in a state of denial.
The Economic Times analysis of Sitharaman’s maiden budget speech noted that she had “avoided any mention of the economic hiccups.” Moreover, as with Modi’s other finance ministers, Jaitley and Goyal, who had employed unorthodox tactics to make the fiscal deficit appear smaller, Sitharaman did not present the true nature of the nation’s finances. Instead of mentioning the various economic indicators that reflect the republic’s fiscal health in the main body of her speech, she relegated them to the appendices.
Sitharaman had been a successful national spokesperson for the BJP in the years before Modi came to power. Now, she employed the skills that had stood her in good stead in that job, as well as in her previous ministerial assignments, to deflect criticism about the state of the economy. On 30 August 2019, she announced that ten state-run banks would be consolidated into four. A top government official told me at the time that the announcement was deliberately scheduled to coincide with that evening’s release of quarterly GDP figures, which showed that growth had fallen to five percent—the lowest in six years.
