Miles covered, miles to go

India Transformed: 25 Years of Economic Reforms Edited by Rakesh Mohan Penguin Random House ₹999  

Technocrats should be heard carefully. Not heeding to their low-decibel wisdom can cost you dearly. In 1971, on first entering government as an economic advisor, former prime minister Manmohan Singh wrote a paper, ‘What to do with victory’, arguing that Licence Raj’s controls that were being spun in the name of socialism would not lead to growth; the maze of controls would strangle the impulses for growth. It took India 20 years to dismantle those controls and break free. If 1947 brought political independence, 1991 set the economy free.

Why did it take so long? The problem in India is not so much of not knowing what is to be done. There is always a body of actionable analysis gathering dust, waiting to be acted upon. But political agendas are often too full of other things to do. Bureaucrats, who perform exceedingly well when the goals of their political bosses align with the people’s, such as in times of calamities or the Kumbh Mela, do not stress enough on the urgency of course correction in time.

The 1991 crisis—the shock of the 1990 Gulf war pushed the deteriorating balance of payments into a full-blown crisis, leaving the country’s reserves with just enough foreign exchange to cover the import bill for barely three weeks, and on the verge of a default on its external loan repayment obligations—gave an unlikely team of a politician, a technocrat-finance minister and a bureaucrat the perfect excuse for executing difficult change. In two years, then prime minister P.V. Narasimha Rao, his principal secretary, IAS officer A.N. Varma and finance minister Singh took decisions that transformed India. The country acquired a taste for markets, finally burying the ghost of the East India Company, suspected private business less and opened to foreign investors. Lives changed unimaginably. Although not all lives changed equally.

Lack of consensus

Crisis over, political opportunism resuscitated. The reform team lost spirit. Till today, 26 years later, strong reforms that create a class of both winners and, in the interim, losers have not been taken up. Such as labour, agriculture reforms. These are painful, but necessary to change lives still mostly untouched by 1991. Singh rose to prime ministership, but in ten years could not drive political consensus for them. And, although advice heaped upon advice implores it to bite the bullet, the government led by Prime Minister Narendra Modi, despite the unassailability of its majority, is inert to the need.

India Transformed is yet another reminder that political mindsets have fallen behind the rest of the country in transforming it. Politicians are content creating strong consensus for weak reforms, and weak consensus for strong reforms. The title suggests a comparison of what India is today with what the country was in 1991. And, the chapters by Infosys founder Narayan Murthy and HDFC chairman Deepak Parekh on their companies’ careers and Rama Bijapurkar’s essay on the peculiarities of the Indian consumer serve up delightful doses of then-versus-now. But this book commiserating the 25 years of economic reforms is not focused on those juxtapositions.

These masterful papers and essays by leading lights of economics and business tackle important questions: What were the reforms; what were they intended for; how they have affected the economy. Of what the 1991 reforms intended to achieve, the book examines how much has been accomplished. What emerges is a neat demanding agenda of problems both new, the unregulated negative effects of growth, and old, the backlog of the unfinished backlog pending from 1991.

Low-decibel and deeply analytical, it is a break from the cheerleading and the self-congratulatory narrative of world-beating GDP growth. India Transformed is concerned with the quality too, not just the speed of growth.

It speaks the unpleasant truths: Not all change of the last 25 years is good. Air and water are getting dirtier and forest cover is retreating. Of the good change, there could have been more. By 2016, China’s GDP per head was double that of India; these were at the same level in the two countries in 1970s.

New thinking

The authors in the book do not share the incumbent government’s pessimism on employment: Jobs will come out of faster, quality growth. Time is ripe for new thinking, writes the last deputy chairperson of the now-abolished Planning Commission, Montek Singh Ahluwalia, with a touch of caution, on dangers of complacency setting in. The conditions are conducive.

The disquisitions challenge widely-held notions about the 1991 reforms. They were more homegrown than commonly understood, went far beyond the International Monetary Fund’s conditionality for bailout. The characterisation of the reform strategy as gradualism is rejected. To cover up for sloth in implementation, opportunism is presented as considered gradualism, offers Ahluwalia.

The editor, Rakesh Mohan, a Distinguished Fellow with Brookings India, traces controls of the Licence Raj to World War II and the promulgation of the Defence of India Act in 1939, much sooner than the decades influenced by socialism.

Mohan was an author of an early draft of the 1991 industrial reforms. He shares a little-known story of how Ajit Singh, the Industry Minister in the V.P. Singh government, an IITian with specialisation in Computer Science from the Illinois Institute of Technology, and a stint at IBM, was the one who had really set the ball rolling on industrial reforms.

A genuine reformer will find much in this book of use. Trouble is, those are rare. The book is convincing in ascribing the blame to whimsical political will, but stops short of suggesting cures. The authors, despite their vast exposure to the system and deep insights of behaviours, do not come up with fixes for this fundamental problem they so eloquently identify.

India Transformed: 25 Years of Economic Reforms; Edited by Rakesh Mohan, Penguin Random House, ₹999.

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Printable version | Jun 8, 2021 12:12:48 AM |

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