Former Finance Secretary Subhash Chandra Garg has said that Finance Minister Nirmala Sitharaman was one of the reasons he took an early retirement last year. In a blog post detailing the reason for him taking voluntary retirement, Garg said that he didn’t share a ‘good and productive working relationship’ with her, and alleged Nirmala Sitharaman insisted on his transfer from the Ministry of Finance in June 2019 itself, a month after she took over as the FM.
Subhash Chandra Garg opted for early retirement from the Indian Administrative Service (IAS) in July 2019 after the presentation of the Union Budget. In his latest blog post, Garg wrote that there were serious differences between him and the FM on issues such as the economic capital framework of RBI, package for dealing with problems of non-banks, partial credit guarantee scheme, capitalisation of non-banks like IIFCL, among others.
“The new incumbent after the elections, Mrs Nirmala Sitaraman, has a very different personality, knowledge endowment, skill-set and approach for economic policy issues and also for the officers working with her. It became quite apparent very early that working with her was going to be quite difficult and it might not be conducive to undertaking necessary reforms for the attainment of the objective of building a $10 trillion economy of India,” he wrote.
He said that she came with preconceived notions about him, did not have confidence in him, and was not comfortable working with him.
Garg wrote that he didn’t want to work with the government outside the Finance Ministry, and had decided by June 2019 that he would take voluntary retirement ‘to be able to work on the wider economic reform agenda outside the government’.
He said that he discussed the same with PK Mishra, then Additional Principal Secretary, who oversaw appointments and transfers in the PMO, and that “both of us agreed that the best course would be for me to make way for the new FM to ‘function smoothly’.”
“I explained to him that my decision to leave the government was not out of any pique or resentment, but quite a well-considered one and that this was in my best interests,” Garg wrote.
Garg praised former Finance Minister Arun Jaitley in his blog, saying he had the right “temperament and ability to forge consensus.”
“Jaitley focused on broader policy issues. He left the running of the departments and implementation of policies to the Secretaries. He genuinely encouraged contributions on major policy issues to come from the Secretaries. He made the Secretaries present the policy proposals to the Prime Minister’s Office as well as to the media and the public. He was a very magnanimous and broadminded person. It was the best of the time personally and professionally to work with Shri Arun Jaitley,” Garg wrote.
In the blog, Garg wrote, however, that the first reason for him retiring early was that he sensed that India’s economic policy was getting distracted from attaining the goal of building a $10 trillion economy by the 2030s. He added that at the time the interim budget (where this goal was outlined) was being presented, he was aware that the economy was slowing down.
He added that growth was down, capital investment was falling, the financial system was in trouble and the government’s revenue growth had become muted, and India was losing more of its low share in global exports.
He added that things took a turn for the worse after the 2019 elections, but the Budget didn’t show the reform agenda the Interim Budget had put forward, and that the government was turning populist.
“The main budget 2019-20 presented on 5th July was a recital of great work done in the previous five years. It did not, however, have a single major economic reform. Some proposals for reforming sectoral foreign direct investment limits, issuing foreign currency sovereign bonds, selling shares below the 51% limit in case of public sector, which I could push through, were not good enough to alter the course of economic system materially,” he said.
Garg said that the opportunity to work on a big and bold economic reform agenda was slipping away. “If there was no good opportunity to work on reform and building of $10 trillion dollar economy, there was no great fun in working in the government. This was the first major reason of my contemplating to leave the Government,” he wrote.
It is pertinent to note that at the time Garg retired from the government, he is believed to be one of the key reasons behind the Union government asking for the RBI’s surplus cash reserves. This subsequently led to the resignation of former RBI Governor Urjit Patel. He is said to have taken on former Deputy Governor Viral Acharya as well.
He was reportedly the architect of a proposal to raise $10 billion by selling sovereign bonds in external currencies, for the first time, which is said to have brought differences in the government. The move also faced severe criticism from several experts, including former Reserve Bank of India (RBI) governor Raghuram Rajan.
Garg was also at loggerheads with other members of the Bimal Jalan panel, set up to decide RBI's economic capital framework, and had submitted a dissent note to the panel.
Post his retirement, he was appointed as advisor to Andhra Pradesh Chief Minister YS Jagan Mohan Reddy for resource mobilisation in March 2020.