Is the PM really an economic reformer?
India and the world have heard the story many times. Back in 1991, after a foreign exchange crisis that nearly bankrupted us and forced us to mortgage our gold, the Indian government, led by finance minister Manmohan Singh, launched us on the path to economic liberalisation by dismantling the worst elements of the licence-permit raj. The Indian economy began to take off. The rest is history.
Or is it?
Several revisions have been undertaken to the unruffled serenity of this received narrative. In the first, the real impetus to reform goes back to the 1980s, and to the time of Prime Minister Rajiv Gandhi. It is true that some slight loosening of regulations did take place and there was a growth spurt, but the proponents of this view forget that it was debt-financed, Latin American-style, and in many ways sowed the seeds for our crisis in 1991. Nor was there any real attempt to dismantle the pernicious system of controls that shackled the economy.
It is surprising that some quite distinguished scholars have given credence to this odd view, most notably Dani Rodrik of Harvard’s Kennedy School. But then, Rodrik is known as a contrarian. He and those of his ilk have been sufficiently debunked by others with far greater India expertise, most notably Arvind Panagariya of the School of International and Public Affairs at Columbia, so that I need not rehearse all of the arguments here.
While armchair psychology is a dangerous pastime, it is evident that some of the reasons for wanting to shift the presumed credit for economic reform to the Rajiv era is to take the gloss off the role that Dr Singh played in it. Which leads me to the second recent revision. In this new narrative, the real ‘unsung hero’ of the 1991 reforms is not Dr Singh at all, but the now almost invisible-to-history Prime Minister PV Narasimha Rao.
Several commentators have put forward this view recently, and Panagariya seems to have tilted to this view as well.
Not professing to be a Delhi insider, I cannot pass judgement and can only say that the public record leaves open a wide latitude of interpretation. Unless we were there, none of us should pretend to know what happened in those feverish days of 1991 as the crisis unravelled in the smoke-filled back rooms of Lutyens’ Delhi. More to the point, whether justified or not, the second revision also attempts to downplay and, therefore, subtly discredit the role played by Dr Singh in those momentous events and their aftermath. Nor is it purely about setting the historical record straight, since it comments indirectly on the Prime Minister’s signal failure to deliver the next tranche of much-needed economic reforms under both UPA-1 and UPA-2.
In other words, if he was never a ‘true believer’ in reform in 1991, should we be surprised that he has not pursued reform since taking over the big chair? Is he a frustrated reformer or really an old-style Congress socialist wearing the mask of a frustrated reformer? The Twittersphere has been awash with such speculation, which, if anything, has been stoked, not quelled, by his non-informative meeting with senior journalists last week.
All of this belongs in the realm of speculative psychoanalysis, not in the realm of serious policy discourse. Further, it distracts attention from the real issues. Does it truly matter whether Dr Singh is breaking out into a cold sweat every night because he has not been able to complete his reform agenda or whether instead he is secretly rubbing his hands with glee that he has cut the true blue-turbaned reformer off at the pass?
The current government has failed to pursue much-needed second generation reforms, nor is there any appetite for this from the principal opposition, which has abdicated whatever claim it had to be a pro-reform party dating back to the time of NDA rule. Their incoherent line on the recent fuel price hike attests to that. That leaves the Left parties, ironically, as the only ones having a coherent position on liberal economic reform, which, of course, is antithetical and misguided. The constituency for reform within the political establishment, therefore, goes begging.
The potential reasons for this deplorable state of affairs are multiple. I have suggested that the ‘original sin’ of 1991 is the fact that reform was pursued in crisis mode, with the underlying rationale never fleshed out or articulated once the moment of immediate crisis had passed. Still others suggest that the Congress party never really shed its commitment to old-fashioned socialism, and only assumed the garb of economic reform out of necessity rather than conviction. Indeed, these two theories are complementary.
Time will tell whether history will stick with its original judgement, and accord Manmohan Singh the credit many believe he deserves as a key agent in instigating economic reform in India, or whether one or the other revisionist account will eventually hold sway. What is not in dispute, alas, is how his innings as Prime Minister will be judged, unless something miraculous happens between now and 2014—that is even assuming he survives until then. From auspicious beginnings, the scholar-turned-technocrat-turned politician has really come a cropper.
The author is an economics professor at Carleton University in Ottawa, Canada
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