By 10 am on 20 September, while the media contingent from Delhi was waiting at Hotel Kadamba in Goa for the press briefing by finance minister Nirmala Sitharaman ahead of the GST Council meeting, it was panic situation for Sitharaman and revenue secretary Ajay Bhushan Pandey.
The approval for the ordinance for arguably India’s biggest direct tax reform was yet to be obtained from President Ramnath Kovind. A joint secretary from the finance ministry was supposed to go to the Rashtrapati Bhawan on Friday morning to get president’s signature on it, but he got late by a couple of minutes. By that time, security was tightened for the visiting Mongolian president Battulga Khaltmaa who was about to meet President Kovind.
“It was nerve-wracking for us. The revenue secretary and I were sitting next to each other and sipping tea, but we could not talk,” Sitharaman said.
Finally, the press conference started at about 10:40 am, leading to the announcement of corporate tax cut and followed by the biggest market rally in a decade.
Within days of Sitharaman presenting her maiden budget on 5 July, the chatter about a deeper economic slowdown had gained currency. So Sitharaman started the consultation process with banks, NBFCs and Delhi based industry groups to get a sense of the problem.
Meanwhile, the news of Café Coffee Day founder VG Siddhartha committing suicide came on 29 July had further dented business sentiment with complaints of rising “tax terrorism”. A day after prime minister Modi’s 15 August independence day speech in which he said wealth creators should not be seen with suspicion, Sitharaman extended her consultation process to cities outside Delhi beginning with Ahmadabad. Things started moving on the policy front and Sitharaman announced the first set of measures on 23 August for automobiles, infrastructure and portfolio investors followed by the public sector bank merger on 30 August.
The last consultation was at Chennai where she sat with representatives of construction, sugar, textile, and gold sectors on 10 September apart from the tax officials. On 11 September, she met the leading industry experts and entrepreneurs of Chennai over lunch at Indian Institute of Banking and Finance where she was staying and attended a wedding ceremony before flying back to Delhi on same night.
“That meeting with key industrialists of South India more than ever reemphasized the need for reforms,” Sitharaman said. She had a late evening meeting with commerce minister Piyush Goyal and foreign affairs minister S. Jaishankar in Delhi before calling it a day.
On Thursday, she did not attend office as she fell ill with a stomach upset. However, on Thursday and Friday ahead of her announcement of exports and real estate package on Saturday, she met key finance ministry bureaucrats. “Alright, the packages are getting ready. But where are we on reforms? In the second tenure of Modi, have we started doing anything on reforms?,” she asked the secretaries of her ministry.
“In fact, I joked with one of them, I don’t know whether it was economic affairs secretary or revenue secretary, let’s start preparations for the budget, who in turn told me it was too early,” Sitharaman said.
“I was thinking why are we only doing these every Friday measures? Can I not do something more instead of waiting for the next budget? Eventually, I also needed to change the mood,” she added.
After the idea of corporate tax cut was fleshed out, things moved quickly. “Initially, in the ministry nobody was aware of it. It was only me and revenue secretary doing the calculations. After that, the officers moved quickly. I was very demanding, but the officers delivered,” she added.
The files moved quickly. Legal vetting happened, it got the Prime Minister’s Office nod and the Cabinet note was ready. However, no Cabinet approval could be obtained because there was no Cabinet meet on Friday.
Asked about the timing of her announcement, she said she wanted to announce it before the start of the festive season. “(I told myself) If I don’t announce it before PM goes to the US, by the time he comes back it will be already Navratra,” she said.
Asked how see kept it a secret, Sitharaman quipped: “It was like you are walking around the bazaar and expecting nobody to see you. It was Balakot of sorts.”