This polite and civilised book is the memoir of a man whose thinking, after P.C. Mahalanobis’s in the 1950s, shaped India’s economic policy the most. But there the similarity ends because if Mahalanobis was influenced by the Soviet approach to economic strategy, Ahluwalia was influenced by the American one.
After studying PPE (Philosophy, Politics and Economics) at Oxford University he went to the World Bank where he soon headed the poverty division. Ahluwalia says the job was first offered to Arun Shourie who turned it down saying there was nothing to say about poverty other than “it is there and there is a lot of it.”
No ‘I’ word
If Mahalanobis got his chance when one Prime Minister, Jawaharlal Nehru, trusted his judgement, Ahluwalia got his when two others, P.V. Narasimha Rao and Manmohan Singh, trusted him. But unlike Mahalanobis who, for a while, was the real backstage man, Ahluwalia influenced policy from the centre of the stage. That’s why the title Backstage of this book is quintessentially Ahluwalia. He rarely uses the word ‘I’.
This book captures the essence of policymaking between 1985 and 2014. But it does so very blandly. That’s a pity because an essential ingredient of writing contemporary history is drama, which is missing, and Ahluwalia has written about some very exciting times when a prevailing intellectual paradigm was being pushed aside by a new one.
For example, a discussion of the tensions that arose while developing new policies would have given us some important insights into the management of policy which, during the coalition years, had come to mean the management of ministers. After all he worked with so many in his different roles in government.
Ahluwalia returned home to India from the World Bank in mid-1979 to join the finance ministry. His career really took off in 1985 when he moved to the Prime Minister’s Office. It was at this time that the Indian approach to the economy started changing. As the joint secretary handling economic policy Ahluwalia played an important role.
Architect of reform
The Rajiv Gandhi years (1984-89) saw two major changes: a hesitant movement towards market economics and a shedding of fiscal rectitude. The first worked. The second culminated in the crisis of 1991. Ahluwalia skims over the latter, giving the impression he was a bystander.
It was in 1991 that Ahluwalia really came into his own. As commerce secretary when the Narasimha Rao government came to power he was the chief architect of India’s liberalised import policy. Then, between 1992 and 1997, as finance secretary, he initiated and oversaw financial sector and tax policy reforms. His account of it is, as usual, modest.
In 1998, the Vajpayee government saw no further use for him and he went off to the IMF. Then when UPA I came to power, Manmohan Singh appointed him Deputy Chairman of the now defunct Planning Commission. If the Sonia Gandhi led National Advisory Council guided the government on distributional issues, Ahluwalia focused on growth.
The NAC pumped in a few lakh crore into rural India. The Planning Commission harnessed some of it for investment, in infrastructure mostly. The system worked well till about 2009 when India grew at around 8% during these years.
During UPA II, the government started spending money like there was no tomorrow. It led to massive inflation and a near-crisis in 2013. But by 2010, Ahluwalia, like his boss Manmohan Singh, had become less influential. All he could do was to try and defend the indefensible.
For example, after the ordinance-tearing by Rahul Gandhi, Manmohan Singh asked Ahluwalia if he should resign who told him not to. But he defends Rahul too for upholding a principle.
Sense of helplessness
He didn’t approve of many things. One of them was the retrospective tax on Vodafone. He says he had advised the finance minister to make it prospective. He also blames the delay in environmental clearances without telling us why they happened. Nor does he say what he thought of the UPA’s law on land acquisition. He also says a large section of the BJP was in favour of it. This is not known.
The sense of helplessness seeps through in the chapters on UPA II. With scams and inflation both running high the government lost credibility. Ahluwalia’s despair forms the base notes of the theme song of UPA II.
Finally, unless I missed it, Ahluwalia doesn’t take Narendra Modi’s name even once. There is just one reference to him in the very last sentence of the book. If you want to know what it is, you will have to read the book.
Backstage: The Story Behind India’s High Growth Years; Montek Singh Ahluwalia, Rupa, ₹600.
The reviewer is a commentator on economics.
