Dr K S Krishnaswamy who has just turned 90, has been at the centre of economic policy formulation since 1946, working in the Planning Department before Independence. He was later associated with the Planning Commission, as well as the Reserve Bank of India. He also worked at the World Bank. His book of ‘memories’, released on Thursday on his 90th birthday, is about major areas of economic policy making.

His book is like him, modest and self-effacing. Unlike most Indian policy makers at the end of their careers, Krishnaswamy writes about the important decisions, in which he participated, and the cut and thrust of arguments that led to a policy.

The book reflects a very private person, loath to write about personal matters, personalities, feelings, or even opinions. His cursory references to his wife and family, and slightly more about close friends, demonstrate this. He guards his privacy. The book is a lucid description of the process of planning in India in the early years and the making of monetary policy, describing the discussions on deficit financing, inflation and development, ‘inclusive’ growth, external value of the rupee, etc.

He describes without any rancour, two major embarrassments in his life. One was caused by his being secretary of the Federation of Indian Students’ Associations, dominated by Leftists at the London School of Economics. This caused difficulties since the government of India made him persona non grata as a result. V K Krishna Menon, the high commissioner in London, intervened on behalf of KSK and smoothed things over.

The other embarrassment was in 1966 when India required large foreign exchange through aid, devaluing the rupee as suggested by the Americans, the IMF and the World Bank. He accompanied the deputy chairman of Planning Commission and other high officials to Washington where they discussed devaluation of the rupee. He was not part of the discussion nor did he know that the decision had already been taken.

But many economists and Planning Commission members thought that he was party to the decision and this created some difficulties for him. In the event, as he and many others had predicted, devaluation of rupee did not benefit the economy since India imported only essentials and had little flexibility to increase exports.

Krishnaswamy was involved in the writing of the First Five Year Plan. There was no monolithic Yojana Bhawan and the great policy makers of the next many years like J J Anjaria, K N Raj, G L Nanda, V T Krishnamachari, C D Deshmukh, G L Mehta, and Tarlok Singh. About Tarlok Singh, an administrator par excellence, KSK writes, he “effectively brought home to us that we had to make sure of all the details in executing the projects and programmes in the plan. It helped me to appreciate the need of quantification and executability of logically valid propositions.”

Many roles

He describes Nehru’s role thus: “He had no doubt that in many areas it was the duty of the state to occupy the ‘commanding heights’, so that the benefits of development could be more evenly distributed. He literally drove everybody — the government, his party, the Planning Commission”. Yet Nehru retained the advisory nature of the Planning Commission to ensure democratic screening.

Krishnaswamy describes the meeting of the Planning Commission in 1962 considering how resources were to be found for the ambitious Second Plan. The border with China was heating up. Nehru concluded by saying that “We are honour bound to provide our jawans everything they need… We promised our people much more than freedom from foreign rule… Can we provide them all these without economic development? Let us go for defence with development... We have no choice in the matter and we just cannot afford to let our people down.”

The dilemma of choosing between growth with deficits financing it, and the handling of the resultant inflation has bedevilled Indian policy makers almost since the time of the First Plan. Today, financial institutional inflows with tax benefits have made both stock markets and the rupee’s external value very volatile. Krishnaswamy concludes that budgetary deficits can be managed “provided adequate steps were taken to avoid an undue pressure on domestic prices or an adverse impact on balance of payments”.

‘Social control of banks,’ bank nationalisation and a few years later, the declaration of Emergency took away the RBI’s autonomy in controlling banks and even in monetary policy. Appointment of a pliant Governor K R Puri and Executive Director J C Luther, put the government in the monetary driving seat.

Krishnaswamy was associated with the founding of the ‘Economic Weekly’ and its successor the ‘Economic and Political Weekly.’ From the outset he was a regular contributor. When he retired he became chairman of the Sameeksha Trust, which owned the publication.

It is impossible to do justice to the wealth of material in the book, bearing on various aspects of economic polices, people and institutions. What comes out is the personality of a deeply thoughtful, honest, objective and insightful mind. Economic policy making in India, as he says, shows “the divergence between macro concepts and the micro realities. It is the latter of which the political operators or the social scientists were better aware of than the economic theorist. As questions such as poverty, unemployment, class distinctions and professional diversities became clearer… macro economic categorisation of income, saving, consumption, investment, etc, became less useful than social diversities or sectional interests.”