Ashok Desai once described Ahluwalia as a model bureaucrat, before Ahluwalia revealed himself in a 34-page paper titled Restructuring India’s Industrial, Trade and Fiscal Policies in June 1990.
By Amitabha Bhattacharya
I joined the Planning Commission as a principal adviser in early 2009 with an impression that its deputy chairman was a smart arm-chair economic administrator with World Bank perspective, oblivious of the reality of India’s poor. I was then blissfully unaware of his important academic work on poverty in the mid-Seventies. His reported differences with BN Yugandhar, a stalwart in the civil service, had perhaps coloured my initial opinion. However, working with him and observing him closely changed my views. Essentially, Montek Singh Ahluwalia is a man of ideas, but I also remember him going through every single sentence of the Commission’s draft reports, raising pertinent questions and suggesting innumerable corrections.
Ashok Desai once described Ahluwalia as a model bureaucrat, before Ahluwalia revealed himself in a 34-page paper titled Restructuring India’s Industrial, Trade and Fiscal Policies in June 1990. It was a kind of blueprint that greatly influenced the reforms associated with PV Narasimha Rao. It met with resistance from certain ministries. One criticism, typical of those days, ran like: “This was what several multilateral lending institutions like the World Bank and the IMF wanted India to do.” Nevertheless, most of the suggestions were accepted in the years to follow.
Ahluwalia has chronicled, with clarity and elan, the events and forces that shaped India’s growth trajectory from the late Eighties to the first decade of this century. He has been a witness, more often an active participant, of this irreversible transition, demonstrating what conscientious civil servants with vision and determination can achieve through the power of gentle persuasion. The book depicts how momentous economic decisions were taken and implemented—largely by the much criticised Indian bureaucracy—that would see India move from a low-income to a middle-income economy. How politics and economies interplayed, how higher civil servants interacted with political leadership, and how consistent and dogged pursuit of one’s line of thinking can eventually overcome roadblocks, have all been analysed in this compelling narrative.
For a lazy or hurried reader, the book lists in a column on its cover the watershed events starting from the IMF loan taken in 1981, through big bang reforms of 1991, securities scam of 1992, telecom policy of 1999, privatisation of 2001, infrastructure PPPs in 2005, CWG, 2G and Coalgate of 2012 and the like. While major decisions are taken after wide consultations between various ministries, what should be prioritised depends much on the prime minister’s initiative. Consequently, crucial decisions, often for valid political reasons, are delayed or postponed. But civil servants should never give up, and prepare themselves to be able to seize the opportunity when the PM finds the time politically ripe to take a plunge.
The way the 1991 reforms happened testifies this. With Manmohan Singh as finance minister and outstanding civil servants like Naresh Chandra, Amar Nath Verma and a few others at the helm of bureaucracy, Narasimha Rao surprised everyone by unleashing a torrent of actions within a few weeks. “The rupee was devalued, trade policy was liberalised, domestic investment controls were dismantled, and a new policy towards FDI was articulated”, despite anticipated resistance from some sections of the Congress.
Besides discussing the hows and whys of economic policy formulation, Ahluwalia also provides refreshing insights into his growing up years as also the influences that shaped him. Son of a junior official in the defence ministry, Ahluwalia had a brilliant academic record as a student of economics at St Stephen’s College, and later at Oxford as a Rhodes Scholar, having obtained a congratulatory First. He honed his debating skills in Delhi and then at Oxford where he was elected president of the union. Selected as a young professional at the World Bank, he was offered at the age of 28, a post of division chief (after Arun Shourie declined the offer). When he and Isher, his wife and fellow economist, were well settled at the World Bank and the IMF, respectively, they decided to come back to India, Ahluwalia joining as a joint secretary-level officer in a ministry. This decision to return home, encouraged by Manmohan Singh, was a very courageous one at that point of time.
As Ahluwalia recollects, “… he became a role model for me as he had given up an attractive job at the United Nations… to return to India, first as an academic and moving later to government.” In fact, this was going to be a sustained and enriching relationship to which the book makes many endearing references. At times of crisis, Singh sought the opinion of Ahluwalia, like whether he should
resign in times of doubt. Through Ahluwalia’s words, one understands Singh much better as a noted economist and a noble being whose heart was at the right place. Citing an example when Singh appointed Raghuram Rajan, despite his strong stance against the government, as the chief economic adviser, Ahluwalia is reminded of a Kabir doha that translates into: “Keep your critic close to you; give him shelter in your courtyard. Without soap and water, he will cleanse your character”.
Though the growth of GDP depends on many factors, internal and external, it can be seen that from 2003-04 to 2007-08, the growth rate was spectacular, peaking in 2006-07 at 9.6%, before reducing to 6.7% in 2008-09, when global recession set in. However, the book is not all about GDP and the complexity of the decision-making process. To enliven it, Ahluwalia laces it with humour and witty references. For instance, a Russian economist described the Indian economy as confused, since he could not make a distinction between ‘mixed economy’ of those days with ‘mixed-up economy’. Like after his resignation, VP Singh said, “Well, Montek, you may think I have broken my leg, but you will have to admit I scored a goal!” in the context of implementing the Mandal recommendations.
As a balanced person, he refers to the major shift from disinvestment to privatisation during Vajpayee’s time, and notes how on account of charges that were later proved baseless after due investigation, “less was done in the six years of the NDA on privatisation than might otherwise have been possible”.
Ahluwalia also boldly expresses his views, with a seasoned economist’s understanding of issues, on the various ‘scams’ that plagued the UPA-II regime, much of which was often exaggerated, based on inadequate understanding with hypothetical and unrealistic assumptions. Highlighting how judicial intervention in an economic process can result in unexpected and sometimes undesirable side effects, he aptly observes: “The cancellation of an allocation obtained through improper means is one thing and would not affect the investment climate. However, cancellation because the process followed by the government was judged to be improper, with no demonstrable fault of the investor, is quite another.”
He does not shy away from explaining what the Planning Commission achieved and what its limitations were. In the epilogue, Ahluwalia shares his perspectives on the current economic slowdown and suggests what the present dispensation should do.
Ahluwalia remains an optimist and his work is completely free from malice or rancour. Through his compassionate view, one understands better his mentor Manmohan Singh. He is deeply appreciative of Rajiv Gandhi, of Narasimha Rao who encouraged innovative solutions and observed, “We must get rid of the cobwebs in our mind”, and also of Vajpayee. Ahluwalia rightly concludes that the real test of political leadership lies in the ability to marry good economics with politics. Much of this tome shows the validity of this observation. A scintillating work that should be read and digested by every educated person concerned with the Indian economy.
Amitabha Bhattacharya is a former IAS officer who has also worked in the private sector and with the UNDP
Backstage: The Story Behind India’s High Growth Years
Montek Singh Ahluwalia
Pp 464, Rs 595