New Finance Secretary TV Somanathan: An articulate economic voice trusted by the top leadership

Finance Secretary TV Somanathan.

Finance Secretary TV Somanathan.

There is said to be a perceptible difference regarding the relationship between Prime Minister Narendra Modi and his top bureaucrats now compared to his first term in office. If various reports are to be believed, he has pulled up officials on multiple occasions in the past year. The latest dressing down apparently was regarding the system’s readiness in the face of a crushing ‘second wave’ of COVID-19 cases.

Even in this backdrop, new Finance Secretary TV Somanathan remains one of the Prime Minister’s most trusted advisors and implementers when it comes to economic policymaking.

Somanathan, the Expenditure Secretary, was designated as the Finance Secretary on April 29. As per the norm, the seniormost of the five Finance Ministry secretaries heading Expenditure, Revenue, Economic Affairs, DIPAM and Financial Services is designated as the Finance Secretary.

Somanathan, Economic Affairs Secretary Ajay Seth, DFS Secretary Debashish Panda and DIPAM Secretary Tuhin Kanta Pandey are all from the 1987 batch of the Indian Administrative Service. But Somanathan had a higher rank in his batch, when he stood second in the All India exams. This is a deciding factor between officers of the same batch.

Tarun Bajaj, the other secretary,  in charge of Revenue, is from the 1988 batch.

The reason the top political leadership trusts Somanthan, who is from the Tamil Nadu Cadre, is clear.

Between 2015 and 2017, he was in the Prime Minister’s Office looking after the implementation of economic policies. He had a major role to play in the ‘PM Gareeb Kalyan’ and ‘Aatmanirbhar Bharat’ set of announcements in 2020, during the first wave of the COVID-19 pandemic.

Then, he was part of the economic-brain trust that came up with Finance Minister Nirmala Sitharaman’s 2021-22 budget. The main themes of the budget, be it fiscal expansion, push to create jobs and demand through public investment in infrastructure, or lack of any populist announcements, all had his imprint.

In fact, Somanathan and the then Economic Affairs (and now Revenue) Secretary Tarun Bajaj are said to have written major parts of Sitharaman’s speech.

A trained economist with a PhD in the subject from Calcutta University, Somanathan is an articulate speaker of ideas, and popular among fellow bureaucrats, though his role as Expenditure Secretary isn’t. After all, it is the office that decides  how much money a department or ministry should or should not get.

Cleaning up the books

But what he himself will consider one of his biggest achievements will be cleaning up the central government’s balance sheets.

One of the key announcements in the budget was that the government would end the practise of extra-budgetary borrowing from the current fiscal year. “I propose to discontinue the National Small Savings Fund Loan to FCI for Food Subsidy and accordingly Budget Provisions have been made in RE 2020-21 and BE 2021-22,” the Finance Minister had said.

Extra-budgetary resources (EBRs) were an integral, if frowned upon, part of budgets. In simpler terms, this refers to allocations made from money outside of revenue or borrowings, through means such as the National Small Savings Fund, and fully serviced bonds like the bank recapitalisation bonds.

This was usually done to keep certain expenditure below the line, in a way that they would not reflect in the fiscal deficit numbers of the government. The fiscal deficit is the difference between the expenditure and revenue of a government when the former outstrips the latter.

The biggest receiver of off-budget financing through NSSF loans has been the Food Corporation of India. When Somanathan became Expenditure Secretary in December 2019, he made budget transparency one of his biggest priorities. So, from the 2019-20 budget, the government started showing off-budget numbers, and within two years has nearly eliminated them.

During last year’s economic slowdown, as the centre’s revenues were hit, Somanathan also enforced expenditure curbs on various ministries and departments across the central government. These measures are estimated to have saved the exchequer around Rs 1.5 lakh crore.

Looking ahead, the second wave and regional lockdowns mean that India’s post-COVID economic recovery could be delayed further. Somanathan’s policy inputs and interventions will be ever more important.