Most remember the humour, the self-deprecation, but Atal Bihari Vajpayee was also one of India’s most reformist prime ministers
· Pakistan bina Hindustan adhura hai,
On being told by a Pakistani minister that Pakistan was incomplete without Kashmir
· Is there any harm if I send the message tomorrow morning,
On being asked by a strident reporter what message he had for Benazir Bhutto tonight
Any conversation about Atal Bihari Vajpayee invariably centres around his humour, his ability to laugh at himself or his situation. About to lose the trust vote in Parliament, he asked with the trademark twinkle in his eye, “You say that Vajpayee is a good person, but his party is not good … so I want to ask you, what do you want to do with this good Vajpayee”?
What is missed in this reminiscing is that beneath that warm exterior was one of India’s sharpest minds, a prime minister who never seemed to assert himself—meetings went on for hours without Vajpayee revealing his mind—but still delivered some of the country’s best moments; indeed, many of the top initiatives even today were started under Vajpayee’s stewardship.Vajpayee’s nuclear triumph is well known, from managing to keep the tests secret to getting the US to come around and relax the sanctions. Less appreciated is the fact that, never before, or since, has there been the kind of privatisation that took place under Vajpayee.
While Maruti’s privatisation ensured India became a global small-car hub—only after Suzuki took over did it start investing in R&D in India—Vajpayee had to battle the Shiv Sena, a powerful ally. Indeed, when the Sena minister handling the industries ministry repeatedly refused to sign on, Vajpayee had to threaten to bypass him; disinvestment minister Arun Shourie was then dispatched to convince Sena chief Bal Thackeray. While Suzuki wanted to pay a lot less than the government wanted, a solution was found by doing an IPO that was guaranteed by Suzuki; as it happens, the IPO didn’t devolve and the government made a lot of money as Maruti’s share prices rose.
Other successful privatisations include Hindustan Zinc which saw its output and reserves rise dramatically once Anil Agarwal started investing in it after the purchase. As compared to Rs 11,779 crore between 1992 and 1998, Vajpayee collected Rs 33,472 crore, or an average of 0.23% of GDP each year; the NDA under Narendra Modi has garnered 0.38% on average, but a significant part of that is from PSUs such as LIC, and there has been no privatisation.
Those worried about the near impossibility of pro-industry reform—recall Congress president Rahul Gandhi’s suit-boot jibe —must learn from Vajpayee. Though the Congress had brought the private sector into cellular telephony in 1994, telcos were bankrupt by 1999 and defaulting on the high licence fees. Had Vajpayee cancelled the licences, this would have embroiled the sector in court cases since the telcos had filed suits against the government for delays in clearances etc.
Telecom minister, Sushma Swaraj, negotiated a complex settlement that involved, simultaneously, the telcos withdrawing all cases and the government changing the high fixed fees to annual revenue-shares —the sector grew so fast as a result, the government made more money. More important, while the Congress had agreed there would only be two cellular players in each circle, Swaraj forced the telcos to agree to any number of players under the overall supervision of the telecom regulator—this unbridled competition is the genesis of India’s telecom revolution. Never before, or since, has any government dared to make such a bold settlement with industry, and one that worked out so well for everyone, including the country’s citizens.
Emboldened by this, Vajpayee introduced sweeping electricity reforms using Gajendra Haldea’s Electricity Act. As in telecom, the Act sought to usher in increased competition as the electrical wires to a customer’s house belonged to the power company, but the customer was free to buy electricity from any supplier. Sadly, with no government ever implementing the Act, power tariffs never really fell and the sector has needed a bailout every ten years.
If people marvel at Nitin Gadkari’s highway construction skills, and this has become a driver of infrastructure, Vajpayee showed the way here, too, with his ambitious plan to four-lane 14,279 km of the Golden Quadrilateral, and later the North-South, East-West corridors, as well as various port connectivity projects under BC Khanduri—5,418 km was completed in Vajpayee’s tenure. At finance minister Yashwant Sinha’s insistence, an ambitious rural road programme was also started and, by the time Vajpayee demitted office, over 60,000 km of this had been completed.
The present government’s homeopathic increases in LPG prices, and the UPA’s for diesel, was seen as a smart way to cut subsidies in a palatable manner, but it was Vajpayee that mastered the art with 33 changes in various petroleum prices during his tenure. Kerosene prices rose 2.6 times in Vajpayee’s tenure, unthinkable for such a politically sensitive fuel.
Though Vajpayee reduced the fiscal deficit just marginally—he averaged 5.5% of GDP versus 5.7% in the period since 1991—he brought in the FRBM to ensure a road-map for collapsing it. As FM, Sinha ushered in a 3-rate VAT in place of excise duties, with input credits—the precursor to GST—and also introduced service taxation for the first time. Big reforms were made to cut small savings interest rates that paved the way for India’s EMI revolution; this made the middle classes turn against Vajpayee, but were a critical factor in India’s subsequent growth spurt.
Other big reforms included taming the runaway pension bill —government employees got pensions equal to half their last salaries and various pay panels hiked salaries regularly. While pensions remained unchanged for older employees to minimize protests, new employees were shifted to a ‘defined contribution’ under the New Pension Scheme that allowed subscribers to determine their investment in debt/equity, the precursor to larger pension reforms in India.
Not bad for a prime minister who was known more for his wit, oratory and camaraderie than for being a tough policy-maker. Perhaps the biggest tribute to Vajpayee came from prime minister Modi who, despite his differences and dramatically contrasting leadership styles, told the nation on Independence Day that his Kashmir policy would follow Vajpayee’s three principles—Insaniyat, Jamhooriyat and Kashmiriyat.