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How a stellar team of economists transformed India in the 1990s

Former CEA Shankar Acharya’s memoir shows how the close-knit team navigated coalition politics and a balance of payments crisis

(from left) Expenditure secretary K. Venkatesan, minister of state for finance Chandrashekhara Murthy, revenue secretary M.R. Sivaraman, finance minister Manmohan Singh, finance secretary Montek Singh Ahluwalia and chief economic adviser Shankar Acharya, in 1994. 
(from left) Expenditure secretary K. Venkatesan, minister of state for finance Chandrashekhara Murthy, revenue secretary M.R. Sivaraman, finance minister Manmohan Singh, finance secretary Montek Singh Ahluwalia and chief economic adviser Shankar Acharya, in 1994.  (Courtesy HarperCollins India)

In the early 1960s, the then US president, John F. Kennedy, filled his administration with academics from Harvard, in particular, and other luminaries. The US ambassador to India, John Kenneth Galbraith, and Robert McNamara, Ford Motor president and then US defense secretary, were among them. The American writer David Halberstam called them The Best and The Brightest but the epithet, also the title of his book, was laced with irony because the administration was responsible for the catastrophe that was the Vietnam war.

Reading former chief economic adviser Shankar Acharya’s An Economist At Home And Abroad, one cannot help but conclude that The Best and The Brightest is a more apt description of the team that led India’s economic reforms in 1991. Manmohan Singh, Montek Singh Ahluwalia, Bimal Jalan, C. Rangarajan, Y.V. Reddy and Acharya are the most capable economic administrators India has had.

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Ability aside, they were unusually close-knit. Soon after Acharya returned to India in 1993 and moved into government housing in Delhi, he and his family were subjected to a gushing leak in their new home. Within minutes, Ahluwalia, then Union finance secretary, had shown up at the Acharyas’ door with tools to fix it—he quickly cut a branch of a frangipani tree to plug the water mains pipe.

The two men had not only worked together at the World Bank but had studied at Oxford at the same time. Acharya’s engagingly candid memoir records that he used Ahluwalia’s notes to study for his economics papers.

The interplay of conviviality, coincidence and circumstance is one of the many charms of this book. If we can blame the British for the debilitating Indian variant of Fabian socialism of the 1940s and 1950s and the depredations of colonial rule, we must also acknowledge that Manmohan Singh, Ahluwalia and Acharya all studied at Oxford and played a pivotal role in unshackling the economy. Singh’s PhD thesis at Oxford presciently argued against the export pessimism in India and other parts of the developing world.

An Economist At Home And Abroad is less about the ups and downs of the 1990s reforms process than one might expect. Jairam Ramesh’s book, To The Brink And Back, has delicious details about the late P.V. Narasimha Rao’s alarm at the first devaluation and attempt to stop the second. By the time then finance minister Manmohan Singh had called the Reserve Bank of India (RBI), however, the second devaluation had gone through.


‘An Economist At Home And Abroad’, by Shankar Acharya, HarperCollins India, 316 pages,  <span class='webrupee'>₹</span>599.
‘An Economist At Home And Abroad’, by Shankar Acharya, HarperCollins India, 316 pages, 599.

The subtitle billboards that Acharya’s book is “a personal journey”. And, what a journey. At Jawaharlal Nehru’s suggestion, his father switched from the civil service to the diplomatic corps after correctly predicting the victory of the Awami League in elections, in the 1950s, in what was then east Pakistan. Soon after, the family moved to Phnom Penh. En route, the young Acharya, already an economist at heart, who would go on to work on the World Bank’s first world development report, cannot help observing that Bangkok seemed a “poor populous Asian city with roughly the same standard of living… if not poorer” than 1950s Calcutta (now Kolkata), still corporate headquarters to many British managing agencies.

Acharya is invariably in the right place at the right time. As a boy in Phnom Penh, he presents the young Prince Sihanouk with a memento on behalf of the Indian embassy. A few years later, when his father was posted to Ottawa, Acharya recalls pouring a whisky for the slightly tipsy Raj Kapoor. More pivotally, for him and the country, as he was preparing to return to the World Bank after having taken a leave of absence to work in Delhi, Indira Gandhi was assassinated on 31 October 1984. A reshuffle saw Ahluwalia appointed to the prime minister’s office under Rajiv Gandhi; Acharya was persuaded to stay on and work with the government. After another stint at the World Bank in Washington, DC, when he turned down an offer to be deputy governor of the RBI in 1992, he returned to India the following year to become chief economic adviser (CEA).

Acharya has the distinction of being both the longest- serving CEA and one who served three governments. Acharya, Ahluwalia and others, such as Vijay Kelkar and Rakesh Mohan, provided much needed continuity and coherence to economic reforms for more than a decade. Of Manmohan Singh, he writes, he “was often more knowledgeable on a subject than the senior officer briefing him…both within India and abroad, he was the epitome of dignity, high seriousness and soft-spoken wisdom”.

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He is equally complimentary about the Atal Bihari Vajpayee government and Yashwant Sinha, arguing that the removal of import restrictions on consumer goods, phasing out of reservations for small-scale manufacturers, pushing through of important changes to interest rate structures and bold championing of genuine privatisation (instead of the more typical sleight of hand selling of public sector shares to another public sector entity) added up in many ways to an achievement almost as remarkable as that of the Rao-Singh reform push. Labour reforms were readied in the early 1990s but the difficulties of managing coalitions meant they never saw the light of day.

Acharya’s personal ethic that hard work must coexist with time off, and assignments at the centre of power balanced with stints in research organisations and academia, shines through. His is a life well lived. He is not afraid to record the good times either; “sneaking off” in the midst of the annual International Monetary Fund-World Bank meeting in Madrid to “see my first (and last) bullfight” because he felt the Indian delegation, including the finance minister and RBI governor C. Rangarajan, was more than adequately represented. On the weekend, the team went sight-seeing in Toledo and “agreed on the outlines of the bank interest rate liberalisations that were announced by the RBI shortly after our return to India”. This camaraderie no doubt contributed to the agreement, in the same month, whereby New Delhi would no longer expect the RBI to finance its deficits.

All this seems another planet from the messy departures of the last two RBI governors, within a couple of years of each other, after reports of testy relations between the RBI and ministry of finance. The current government’s inability to retain economic policymakers makes its occasionally erratic policies, such as demonetisation, genuinely baffling. From suddenly reducing the corporate tax rate, which unsurprisingly did little to turn around a prolonged investment slump, to raising duties alongside creating countless import substitution schemes to build an export base, to the relative lack of income support in response to covid-19, idiosyncratic decision-making sits uncomfortably with sensible moves such as undoing retrospective taxation and setting up a bankruptcy court.

Acharya’s concluding chapter is a meditation on how chance has been a guardian angel in his life, both professionally and personally. His self-deprecation is moving. Yet it also makes one reflect that even as India faces much slower GDP growth, with already disturbing implications for employment, workforce participation of women and social stability, the country will likely no longer have “the best and the brightest” in government. In the 1990s, fate created a stellar team just when India needed it most. These men navigated the complexities of coalition politics and turned around a balance of payments crisis to transform the sick man of Asia into an Olympian that could compete in global markets in some industries—all without the shock therapy often used in the developing world and in Russia. It remains a phenomenal achievement.

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Rahul Jacob covered the economic reforms of the 1990s for Fortune and Time magazines.


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