We have never forgiven the World Bank or the IMF for getting us onto the fast track of growth. As a result, for almost every jam we have got into since then, including the latest surge in protectionism in the US against the Indian IT sector, you can find at least one section somewhere railing against the World Bank or the IMF. This is despite the fact that pretty early in the 1990s the World Bank removed itself from broad sectoral themes to more micro development issues, as a part of its global strategy.
Still, every Indian finance minister since 1991 has fought verbal duels, often even among themselves when arraigned as opposition and treasury bench members, debating if it was better to have continued with business as usual or to have taken the ?advice? from these institutions.
Yet reading the Country Economic Memoranda of the World Bank of 1991 and those of subsequent vintage show the World Bank and the IMF were spot on, to locate the present and looming troubles then gathering around the economy.
The Memos identified five sectors where the government had to move to bring about a fundamental reform (World Bank?s words) in the Indian economy. These were reduction in public expenditure, reform of the tax system, liberalisation of trade, delicensing industry and restructuring of public enterprise.
Later on the World Bank added one more layer, that of state level reforms, which finance minister Yashwant Sinha sold as second generation reforms.
No wonder these were among the first set of changes the government worked on, as soon as it was through with the fire-fighting process. Manmohan Singh as the finance minister set up the tax reform committee under Raja Chelliah, cut tariffs on foreign trade, following up with the successive disinvestment commissions. Among the expenditure reforms commissions, the most famous was the one under Geethakrishnan, but that came later under the NDA government.
We can debate to what extent the government has been able to follow through with those suggested changes, but the ones to remember are those that got away. At the height of the balance of payments scare of 1991, the first sector for which the World Bank with the Indian government worked out a road map for, was the modernisation of the agriculture sector. To me, this was a golden opportunity that was missed, and the cost of which we are now reaping.
At that point, the bureaucracy, jolted by the scale of the BOP crisis, would have moved faster; the government would have got more leverage to make the changes as the entrenched opposition to the changes had not yet settled in and most important, it would have allied rural India to the cause of the changes.
As subsequent events proved, the reform path for another contentious sector, power, was undertaken quite late. As the euphoria over the Orissa power sector reform gave way to an acknowledgment of failure, the World Bank went on the backtrack and sort of disappeared into the maze of the NGO sector.
In a way, the abdication by the World Bank of the development space is the more unsettling part of its involvement with India. After starting the economy off, so to speak, on to an absolutely new trajectory, it was understandable that the two institutions will gradually return to the sidelines after the managers of the Indian economy showed themselves adroit enough to take care of the broad issues themselves.
But the World Bank somewhere lost the plot on the individual sectoral themes it was pursuing. For instance, in the Sardar Sarovar Dam project, it was about the only neutral broker between the warring states and the civil society. But when the criticisms got very loud, the World Bank removed itself. In the process, even if there was disquiet about the way the height of the dam was changed, there was no respected body with a stake in the project to take a contra view.
Probably, therefore, the bigger story in the involvement of the World Bank and the IMF in the Indian reform story is of how it wasn?t really there, despite all the noises it made initially, often very accurately.
?subhomoy.bhattacharjee@expressindia.com
