JOIN US'PVN, the unsung architect of economic reforms'
Welcome to an economy characterised by fiscal profligacy, frequent borrowings from multinational institutions to temporarily tide over economic crises, and the rupee trading agreements with the centralised and controlled economies as its greatest source of succour. With its credit ratings being lowered recurrently, it is walking towards a severe balance of payment crisis and defaulting on its external debts.
Sounds apt for present-day Sri Lanka, or Pakistan? No, it is about India.
Come to the dying weeks of the 1980s, and look around. We have an economy that is sinking, and the major political leaders are all busy planning political hunts. Rajiv Gandhi is labouring hard to dislodge the Janata Dal government; the ruling party is about to split under heavy pressure of squabbling, and the BJP is planning a Rathayatra to focus on Ram Mandir. It is business as usual.
Then came 1990, the Reserve Bank of India saw the disaster approaching fast, and in August, it wrote to the government explaining the urgent need to go to the international financial institutions. The then Prime Minister V P Singh decided to ignore it.
The consequences followed: India’s foreign exchange reserves depleted from $1.2 billion in January 1991 to half of it by June that year. The nation was now roughly three weeks away from having no means to import the essentials it needed and defaulting on its external obligations. So it had to undergo the ignominy of pledging 67 tonnes of gold to get an emergency loan from the IMF.
And then a prime minister by chance took over. What did he find around him?
The common man, quite oblivious of the fact that India was on the verge of sliding down the road to a failed economy, still had firm faith in a protective and controlled system. Privatisation was blasphemy, and industrialists were seen as enemies of the people. Worse even, the industry and business captains, mortally scared of competition from foreign entities, loved a closed economy.
PM P V Narasimha Rao had two options before him: Doing some patchwork and earning short-term popularity, or undertaking bold, necessary initiatives and being seen as the one ‘who sold the nation’. Rao decided to play the role of Nilkantha, and that too out of conviction, for he could see what no other top leader, and surely not the prevailing milieu, could see: The beacon of a great future for India.
Thus, 1991 turned into a watershed year in Indian history. Rao chose Manmohan Singh, a technocrat in the economic field and a favourite of the international institutions, and allowed him to go ahead to the extent Rao thought fit.
Within months, a plethora of macro, fiscal and structural reforms radically liberalised and opened up India, and connected it with the global economy. The socialistic regulatory framework was dismantled, the trade policy was changed, the door was partially opened for foreign direct investment, while the banking sector was put on notice.
While Rao was branded as anti-poor and industry-friendly, the wise man knew in reality the Indian government did not have the means to look after the poor. He was convinced that the government would serve the poor meaningfully only if it earned enough revenue, and the government could earn high revenue only if the economy grew at a high rate and industrialisation spread.
It was Rao who decided how far and no further. He served the bitter pills in his very first year, and then waited on to see how things unfolded. He did not allow his finance minister to go ahead with labour reforms though the latter advocated them openly, for Rao knew too much medication might kill the patient.
The most astonishing fact was that Rao played the crucial role of the chief architect of India’s economic reforms while leading a minority government in a tumultuous political atmosphere. He could have been removed by his own party at any time, for he was not a mass leader.
Thirty years later, it is hard to understand what all these meant to contemporary India. If even today a government with a solid majority panics to hold on to necessary farm reforms, imagine the guts the unassuming man from Andhra had.
Rao did not live long enough to see the seed he sowed growing into the fifth largest tree of the world. The man who converted a sinister curse to a blissful boon died unsung and forgotten in 2004. Of course, that was what he deserved, for he was a visionary who marched too ahead of his time.
(The author is a journalist and author based in Kolkata.)
Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.