place in history?
5 June 2004
5 June 2004
An essay in the latest Economist (29 May–4 June) that raises the question ‘Who put the shine into India?’ should be essential reading for our new MPs. It traces India’s break out from the ‘Hindu’ rate of growth and asks who made it possible, Dr Manmohan Singh and Narasimha Rao in 1991, Rajiv Gandhi in 1985–89 or his mother in 1980–84, after her post-Emergency exile when she returned unencumbered by the collective intellectual weight of her old pseudo-socialist cabal?
The answer is a complex one. Indira Gandhi, in her second avatar, had realised the perils of mere vote-catching populism. She slowly began unshackling domestic enterprise from quota raj, also slipping in the first visible FDI in our history in the form of the Suzuki–Maruti collaboration. Rajiv followed with further relaxations and then, after what was mercifully only two years in the doldrums under V.P. Singh and Chandra Shekhar, we were back to reforming again, under Rao and Manmohan Singh. This phase, though, was more radical and created the foundation for sustainable, long-term growth.
What Indira and Rajiv did, argues the Economist , was to pluck the lowest of the low-hanging fruit in the 1980s. Does it then follow that what the BJP-led NDA government did in its six years was to pluck more low-hanging fruit in the second crop from the same reform tree? Possibly, but its record is
a mixed one. It opened up in many areas, rationalised taxes further, freed up imports and foreign exchange, actually sold some profit-making companies—which have all done better subsequently. But, most important of all, it began the process of big spending on infrastructure. It is a pity though that it moved slowly in so many areas, from power to FDI sectoral caps and even civil aviation. Each one of these is now becoming a battle for its successor.
But that is the basic nature of reform in India. If you actually believe (as I do) that reform began ith Indira Gandhi in 1980, you would now be looking back at a quarter-century of reform-led growth. It is also an important fact that while we took the first forty years after Independence to double our GDP, we doubled it again in the subsequent fifteen, and could do it even faster now if the Common Minimum Programme’s promise of 7–8 per cent growth is realised. The reform process, therefore, has been a continuous one and I would dare argue that it has had bipartisan support. With every change in government, the incumbent has handed over the baton to the successor with unfinished agendas. The change has continued. In a quarter-century now, we haven’t seen a rollback except during the brief Janata Dal interregnum when its finance minister, Madhu Dandavate, once astounded
the Western diplomatic corps by telling them that while he did not mind FDI, ‘I will not go looking for it’. Since then leaders of every party from the BJP to the Left in West Bengal, Lalu to Chautala, Mulayam, Mayawati and Jayalalithaa have wooed FDI.
The other continuing thread in this quarter-century has been that opposition to the reformer has almost entirely come from within. Indira Gandhi could override it partly with the force of her personality and partly because what she was doing was still so unobtrusive, mostly stealthy. She packaged the arrival of Suzuki in complex agreements that befuddled even the most vigilant
xenophobes around her. But I believe that her most significant contribution was at a different, and most vitally fundamental, level. Our access to recent history is extremely limited, so we do not know
hether she had foreseen the end of the Cold War and Soviet decline. But even as she tacitly backed the Soviet invasion of Afghanistan, she acted proactively to end the freeze with the US. Her meeting
ith Ronald Reagan in October 1981 started a fundamental shift, not merely in our foreign policy, but in our entire worldview. In 1981, nobody (except, who knows, the Iron Lady herself) would have figured this. But could a democracy as emotionally complex as India have gone ahead with sweeping reforms, integrating with global markets and capital flows, if the US and the West were still seen as permanent adversaries? The ‘reform’ of India’s foreign policy, and thereby our popular worldview,
has gone on simultaneously with economic reform.
Changing age-old views, prejudices, suspicions and even commitments in India is a very complex process. It is not like a Lee Kuan Yew or Mahathir waking up one morning and issuing a diktat. The
complexity is underlined by the way each set of reformers has been hobbled from within. Rajiv, as he hit the Bofors crisis midway through his tenure, was persuaded to not merely halt reform, but hark back on the old mantra of US-bashing with that stunning ‘naani yaad dila denge’ speech. Rao and
Manmohan Singh were consistently opposed not merely by Arjun Singh—who opposed everything in that cabinet anyway—but also by the likes of Rangarajan Kumaramangalam (who later became a reformer of sorts after joining the BJP), Vayalar Ravi and even A.K. Antony, who produced a report blaming his party’s 1996 defeat on economic reforms. Just for the record, it is now his turn to battle
the Left in his state to defend his own ADB-funded reforms.
The BJP–NDA years were no different. Through their six years there was no real opposition to any reformist policies from the real opposition. The Left did not matter. The Congress was extremely constructive in voting for so many reformist legislations that many of the NDA constituents opposed. Almost all the opposition to reform came entirely from within. At one end of the spectrum, there were the RSS and Swadeshi Jagaran Manch, with their unreconstructed economic revanchism and retro- Gandhian fixation. At the other were so many cabinet members who saw a security threat in all kinds of things, from increasing the FDI cap in telecom (while so many of them used Hutch cellphones) to privatising what were merely refining and retailing petroleum companies like HPCL and BPCL.
When Vajpayee looks back on what he started but left unfinished in his six years, he would regret deeply not putting his foot down on the five or six occasions when policy decisions—already widely debated and accepted—were blocked from within.
Manmohan Singh, therefore, should have a pretty good idea of what he should expect. One of the most cruelly ironical aspects of the history of our reform has been opposition from within. It comes
partly from unevolved intellect, partly through inter-corporate lobbying and sometimes out of a sheer clash of political ambitions. The kind of opposition he may face from the Left, actually, will be more predictable and principled. He and Chidambaram will argue with the Left on a different plane, take
some ground and concede some. The real trouble will come, as always, from within.
Yet, when both reflect on 1991, the difference should only encourage them. As both have acknowledged, the NDA has handed over an economy that is sounder at a macro level than ever before in our history. Inflation and interest rates are low, reserves plentiful, exports booming and,
hat is more important, several infrastructure projects, notably highway building and port/airport/power sector modernisation, are already under way. Keeping these going is merely the
‘lowest of the low-hanging fruit’ Singh can pluck. His challenge would be to convince people deeper in the countryside that reform is even more important for them than for their richer cousins in the cities, find the money for some populism and yet prepare the ground for the next generation of reforms that history, one hopes, would see as being even more significant than what he did with Rao in 1991.