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How Manmohan Singh became the architect of India’s economic fortunes

In this exclusive excerpt from her new memoir, Isher Judge Ahluwalia remembers Manmohan Singh’s pioneering role in crafting India’s economic destiny in 1991

Isher Judge Ahluwalia in her office at the Centre for Policy Research, Delhi, in 1994.
Isher Judge Ahluwalia in her office at the Centre for Policy Research, Delhi, in 1994.

Sometime in 1975, the fieldwork for my PhD thesis brought me to Delhi. I was alone on this trip. Dr Manmohan Singh was, by then, the chief economic advisor in the Ministry of Finance. After [an] initial dinner with Dr Udham Singh, we had kept in touch as, once in government, he used to come to Washington for the Fund-Bank meetings and Montek [Singh Ahluwalia] would meet him there. I had also met him a few times. I visited him in his office in Delhi and discussed my macroeconometric model of the Indian economy, which I was working on for my thesis. It was a very useful discussion, and at the end of it, he invited me home to have lunch with the family. It was the first time I met his wife Mrs Gursharan Kaur and their three lovely daughters, one of whom was out in the sun on a small desk and chair studying. We had simple home-cooked khaana which felt like a feast for anyone visiting from Washington! After the lunch, I distinctly remember Dr Singh, Gursharan and their three daughters all coming to drop me to my in-laws’ place in Lajpat Nagar. Gursharan drove the car herself. As a young 30-year-old PhD student on a solo trip to India for fieldwork, I was overwhelmed by their warmth.

[Dr. Singh] encouraged Montek to apply for the position of economic advisor in the Ministry of Finance, which was about to be advertised. Dr Singh’s encouragement was a clinching factor in Montek’s decision to return. Montek always made the point that here was someone who could have got any number of international jobs but who was living and working in his own country, and at the top of the economic policy establishment. In conversations with him, Montek could clearly see that it was one thing to engage with developing economies from the comforts of a World Bank job and it was quite another to give up this comfortable life for one that might be less rewarding in material terms, but would be immensely more challenging both professionally and intellectually.

I was in the visitor’s gallery in the Lok Sabha when Dr Singh made his historic Budget speech in July that year. It was a pivotal moment. If one looks at the history of economic policymaking in India, there was tremendous pessimism among market-oriented economists in the late 1960s and early 1970s about being able to effect policy change in a country steeped in socialist controls. Many of our best minds left to teach abroad and the quality of domestic debate deteriorated. Their pessimism was justified, and the country would not be ready to listen to them for two decades. The one critic of Indian economic orthodoxy, who stayed on, keeping the faith and keeping up the fight, was none other than Manmohan Singh. When the winds turned, it was he who brought about change that was monumental. The old Left consensus was buried. The Left had dominated economic thinking in India in the 1970s and India had paid the price. Now, it was time for change.

During the tenure of UPA-I, the average annual GDP growth rate was 8.3 per cent which had never been achieved in any previous five-year period. To some extent, this was reflective of a global boom, as the world economy grew at a healthy pace between 2004 and 2009. But there was more than luck at work. The real benefits of the reforms undertaken in 1991 were felt during this period as a large enough portion of the economy became globally competitive, and we were able to reap the benefits of high global growth. We had also become much more open to foreign capital, and were able to mobilize it effectively to raise resources for our own development. To some extent, Prime Minister Manmohan Singh reaped the fruit of the seeds sown by Finance Minister Manmohan Singh a decade and a half earlier. It helped that in that intervening period, all governments—under Prime Ministers Deve Gowda, Gujral and Vajpayee—had maintained a commitment to continuity of economic policy.

'Breaking Through—A Memoir': By Isher Judge Ahluwalia, Rupa Publications, 184 pages,  <span class='webrupee'>₹</span>395.
'Breaking Through—A Memoir': By Isher Judge Ahluwalia, Rupa Publications, 184 pages, 395.

But for a variety of reasons, well before it reached the halfway mark, the UPA-II government was cornered into what began to be called ‘policy paralysis’. In hindsight, it is easy to attribute this to the several corruption allegations and scams that surfaced in that period. Undoubtedly, these pushed the government on the backfoot politically. They also galvanized the Opposition, media and civil society. But there were perhaps broader, if less noticeable, undercurrents. I felt that India had come to suffer from a ‘growth entitlement’ syndrome. The vast majority of the electorate had no memory of the pre-liberalization ‘Hindu rate of growth years’, and most commentators believed that a 6-8 per cent GDP growth rate was for the asking—6 per cent growth was seen as achievable by any government, and 8 per cent was seen as easily achievable by a government with moderate competence. The optimists sometimes even spoke of double-digit growth as if it was not a question of ‘if’, but ‘when’ we would get there. To some extent, the economic reforms over two decades had created a sense of complacency in the minds of the general public. More worryingly, this complacency came to be shared in the minds of politicians, businessmen and even academic economists. Many of them came to believe that the economy was on auto pilot and the private sector would deliver growth no matter what the government did. Six years of strong growth, from 2004 to 2010, and, more importantly, the successful navigation of the global financial crisis with a rapid return to high growth (albeit with a higher fiscal deficit), reinforced this complacency.

All of us, myself included, were long-time cheerleaders of Dr Singh—he was one of the first technocrats to enter government laterally and set an example for people like Montek. I didn’t know what constraints were holding him back but there must have been some political and coalition-related constraints, as I was certain that left to himself, he understood better than anyone the need for further economic reforms.

Some months later, I called on Khushwant Singh for tea. I had remained in touch over the years since our first meeting, and would occasionally go and visit him in Sujan Singh Park. We got to discussing the political situation and he sympathized with my view that the government was directionless and seemed paralysed. He said he would give me a message which I should give to the Prime Minister. He then pulled out a pad, wrote something on a page and handed it to me. It was in Urdu which I could not read. Khushwant said the Prime Minister could read Urdu but he read it aloud for my benefit.

It said: Rau mein hai raksh e umr kahan dekhiye thame Na haath bag par hai, na paa hai rakab mein (The horse is in motion; let’s see where it halts. The hand is not on the reins; neither is the foot in the stirrup).

I sought a meeting with Dr Singh and handed him Khushwant’s handwritten verse. He opened it and read it, but did not comment. He then smiled and said I should show it to Gursharan, which I did.

Padma Bhushan awardee Isher Judge Ahluwalia is one of India’s most distinguished economists.

Excerpted from Breaking Through: A Memoir with permission from Rupa Publications.

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