Implosion (16 page)

‘Consensus for Weak Reforms’

Ahluwalia put it more gently in a 2002 paper,
⁴⁶
revealing why there is so little cohesive policy, which applies even more today than it did then: ‘Critics often blame the delays in implementation and failure to act in certain areas to the choice of gradualism as a strategy. However, gradualism implies a clear definition of the goal and a deliberate choice of extending the time taken to reach it, in order to ease the pain of transition. This is not what happened in all areas. The goals were often indicated only as a broad direction, with the precise end point and the pace of transition left unstated to minimize opposition – and possibly also to allow room to retreat if necessary. This reduced politically divisive controversy, and enabled a consensus of sorts to evolve, but it also meant that the consensus at each point represented a compromise, with many interested groups joining only because they believed that reforms would not go “too far”. The result was a process of change that was not so much gradualist as fitful and opportunistic. Progress was made as and when politically feasible, but since the end point was not always clearly indicated, many participants were unclear about how much change would have to be accepted, and this may have led to less adjustment than was otherwise feasible.’

The alternative to that scenario would, of course, have been to have real debates so that everyone realized the full extent of what was needed and signed up to their implementation. However, that would probably have created a gridlock in the complex and corrupt democracy so, with a mixture of jugaad and chalta hai India has muddled on with political parties pushing reforms when they are in government and blatantly opposing them when in opposition. ‘The process can be aptly described as creating a strong consensus for weak reforms!’ says Ahluwalia.

What is required is political leadership. This need not necessarily be loud and vocal like that of Narendra Modi, the controversial chief minister of Gujarat who became the BJP’s prime ministerial candidate with the backing of businessmen desperate for a strong government. The leadership could be quiet but firm, as Narasimha Rao’s was in 1991, though he had the advantage of a financial crisis that gave him the reason to act. Manmohan Singh made the point in a speech in August 2013 when he said, ‘reforms don’t happen just because there is a professional consensus. They happen when the political leadership of the time decides to back these initiatives.’
⁴⁷
He did not, of course, have that backing from the political leadership of Sonia Gandhi, though he was too restrained to say so explicitly.

Notes

1
.   Statement on Industrial Policy, Government of India, Ministry of Industry, New Delhi, 24 July 1991,
http://dipp.nic.in/English/Policies/Industrial_policy_statement.pdf

2
.   ‘An imbalance of liberalization: L.K. Jha talks to John Elliott,
Financial Times
, January 26 2003

3
.   Arvind Virmani, ‘Policy Regimes, Growth and Poverty in India: Lessons of Government Failure and Entrepreneurial Success!’, October 2005, Working Paper Series, Indian Council for Research on International Economic Relations (ICRIER); this paper traces and tabulates the history of India’s economic restrictions and reforms from 1948 to 2004;
http://icrier.org/pdf/WP170GrPov11.pdf
He has a blog ‘Dialogue with Virmani’,
http://dravirmani.blogspot.co.uk/

4
.   ‘30 Years of Change, and Status Quo’,
Business & Economy
, 16 February 2012,
http://www.businessandeconomy.org/16022012/storyd.asp?sid=6746&pageno=1

5
.   JE, ‘Telephone Links for Commonwealth Talks’,
Financial Times
, 8 September 1983

6
.   Robert Lloyd George,
North-South: An Emerging Markets Handbook
, Probus Publishing, Cambridge (UK), Chicago, 1994

7
.   Parts of these paragraphs appeared in a report I wrote in 1995: ‘India and China – Asia’s New Giants: Stepping Stones to Prosperity’, Rajiv Gandhi Institute for Contemporary Studies, Delhi, 1995

8
.   Told to JE by the bureaucrat, July 2012, non-attributable

9
.   Montek Singh Ahluwalia in conversation with JE, June 2013; the article was headed ‘Towards a restructuring of industrial, trade & fiscal policies’,
Indian Express
, 11 July 1990, extracts courtesy of
The Financial Express
archives, 1990

10
. Conversation with JE, December 2013 after the article was retrieved from
The Indian Express
archives

11
.
Policy Making for Indian Planning: Essays on contemporary issues in honour of Montek S. Ahluwalia
, Foreword p. 17, Academic Foundation, New Delhi 2012,
http://www.academicfoundation.com/n_detail/645.asp

12
. Conversation with JE, December 2013

13
. In conversation with JE, August 2013

14
. In conversation with JE, June 2013

15
. Shankkar Aiyar,
Accidental India, A History of the Nation’s Passage Through Crisis and Change
, p. 69, Aleph, Delhi 2012; the first chapter, ‘Bonfire of the Vanities’, of this book goes into some more detail on the history and politics of the reforms;
http://alephbookcompany. com/accidental-india

16
. Trade Policy Reforms
http://tradeportalofindia.com/contentmgmt/Desktops2.html?itemcode=I212&compid=itpo

17
. Conversation with JE and also recounted in detail by Ahluwalia in an essay, ‘Policies for Strong Inclusive Growth’, in
An Agenda for India’s Growth: Essays in Honour of P. Chidambaram
,
Academic Foundation, Delhi, 2013,
http://planningcommission.nic.in/aboutus/history/spe_strong1402.pdf

18
. Manmohan Singh made a fulsome tribute to Chidambaram at the launch of the Festschrift in Delhi on 31 July 2013,
http://pmindia.nic.in/speech-details.php?nodeid=1334

19
. P. Chidambaram told the story at the launch of
Accidental India
(see footnote above), 23 October 2012; also see ‘Statement on Industrial Policy’, Government of India, Ministry of Industry, New Delhi, 24 July 1991,
http://dipp.nic.in/English/Policies/Industrial_policy_ statement.pdf

20
. JE, ‘India and China – Asia’s New Giants: Stepping Stones to Prosperity’, Rajiv Gandhi Institute for Contemporary Studies, Delhi, 1995

21
. Arvind Virmani, ‘Policy Regimes, Growth and Poverty in India: Lessons of Government Failure and Entrepreneurial Success!’, October 2005, Working Paper Series, Indian Council for Research on International Economic Relations (ICRIER); this paper traces and tabulates the history of India’s economic restrictions and reforms from 1948 to 2004;
http://icrier.org/pdf/WP170GrPov11.pdf
He has a blog ‘Dialogue with Virmani’,
http://dravirmani.blogspot.co.uk/

22
. ‘The trouble with coalitions’,
The Economist
, 22 November 2001,
http://www.economist.com/node/875011

23
.
http://ridingtheelephant.wordpress.com/2011/12/01/wal-mart-co-fuel-indian-political-crisis/

24
. Non-attributable conversation with JE, London, June 2012

25
.
http://ridingtheelephant.wordpress.com/2012/08/15/has-india-abandoned-economic-debate/

26
. ‘Licence raj has been replaced by land mafia raj’, interview with Raghuram Rajan,
DNA
, 30 October 2010,
http://www.dnaindia. com/opinion/1459666/interview-licence-raj-has-been-replaced-by-land-mafi a-raj

27
. ‘Report no. 6 of 2013-Union Government (Ministry of Rural Development) – Report of the Comptroller and Auditor General of India on Performance Audit of Mahatma Gandhi National Rural Employment Guarantee Scheme;
http://saiindia.gov.in/english/home/Our_Products/Audit_Report/Government_Wise/union_audit/recent_reports/union_performance/2013/Civil/Report_6/Report_6.html

28
. Text of the legislation,
http://www.prsindia.org/uploads/media/Food%20Security/Bill%20with%20Amendments.pdf

29
. Minutes of the 24 July 2013 Meeting of the Technical Advisory Committee on Monetary Policy,
http://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/IEPR370TAC0813.pdf

30
. Surjit S. Bhalla, ‘Manmonia’s FSB: 3% of GDP’,
Indian Express
, 6 July 2013,
http://www.indianexpress.com/news/manmonias-fsb-3--of-gdp/1138195/0

31
.
http://ridingtheelephant.wordpress.com/2013/08/28/sonia-gandhis-2bn-bid-for-political-security/

32
. ‘India rejects WTO proposals on food security, trade facilitation’,
The Times of India
, 4 December 2013; ‘For India, food security is non-negotiable. Need of public stockholding of foodgrains to ensure food security must be respected. Dated WTO rules need to be corrected,’ Anand Sharma, commerce minister, told a WTO meeting in Bali,
http://timesofi ndia.indiatimes.com/business/india-business/India-rejects-WTO-proposals-on-food-security-trade-facilitation/articleshow/26829962.cms

33
. This news report lists pending reforms: ‘More reforms initiatives in next 2 to 4 months – P Chidambaram’, PTI, 24 April 2013,
http://articles. economictimes.indiatimes.com/2013-04-24/news/38790562_1_ opposition-party-finance-minister-p-chidambaram-executive-actions

34
.
http://ridingtheelephant.wordpress.com/2009/04/01/manmohan-singh-marks-the-limits-of-liberalisation/

35
. Gurcharan Das,
India Unbound
, p. 247, Penguin Viking, Delhi 2000

36
.
India’s Economic Reforms and Development: Essays for Manmohan Singh
, Edited by Isher Judge Ahluwalia and IMD Little, Second Edition updated as part of Oxford India Perennial Series, OUP Delhi, 2012. Texts and videos of the evening’s event at
http://icrier.org/page_book.asp?MenuId=25&SubCatID=1004

37
. Adam Roberts, ‘India’s economic reforms: Now finish the job’,
The Economist
, 15 April 2012,
http://www.economist.com/blogs/banyan/2012/04/indias-economic-reforms?fsrc=gn_ep

38
.
http://ridingtheelephant.wordpress.com/2012/04/19/manmohan-singhs-friends-meet-him-and-say-your-legacy-is-at-risk/

39
.
http://ridingtheelephant.wordpress.com/2011/07/23/india-lost-for-words-20-years-after-its-1991-reforms/

40
. JE, ‘India and China – Asia’s New Giants: Stepping Stones to Prosperity’, Rajiv Gandhi Institute for Contemporary Studies, Delhi, 1995

41
. The transcript of the 31 March 2009
FT
interview is on
http://www.ft.com/intl/cms/s/0/7f6fea0e-1bcc-11de-978e-00144feabdc0.html#axzz2XsryNahd;
I wrote about it on my blog a day later,
http://ridingtheelephant.wordpress.com/2009/04/01/manmohan-singh-marks-the-limits-of-liberalisation/

42
.
http://ridingtheelephant.wordpress.com/2013/04/10/how-we-launched-thatchers-privatisation-word-in-the-ft-in-1979/

43
. Conversation with JE and also recounted in detail by Ahluwalia in ‘Policies for Strong Inclusive Growth’, in
An Agenda for India’s Growth: Essays in Honour of P. Chidambaram
,
Academic Foundation, Delhi 2013,
http://planningcommission.nic.in/aboutus/history/spe_ strong1402.pdf

44
. A television interview with Ratan Tata on NDTV, 20 December 2010,
www.tata.in/media/reports/inside.aspx?artid=+3/rHRSGwIE=
, and ‘“Tatas unlikely to do airline business again”, says Ratan Tata’,
The Hindu
, 9 December 2012,
http://www.thehindu.com/business/companies/tatas-unlikely-to-do-airline-business-again-says-ratan-tata/article4181223.ece

45
.
http://ridingtheelephant.wordpress.com/2009/02/18/india%E2%80%99s-fdi-changes-reveal-weaknesses-in-industrial-policy-making/

46
. Montek S. Ahluwalia, ‘Economic Reforms in India since 1991: Has Gradualism Worked?’,
Journal of Economic Perspective,
March 2002,
http://planningcommission.nic.in/aboutus/speech/spemsa/msa008. pdf

47
. Manmohan Singh at a P. Chidambaram Festschrift book launch in Delhi on 31 July 2013,
http://pmindia.nic.in/speech-details.php?nodeid=1334

7
Unlocking Opportunities

The 1991 reforms had an enormous impact, opening up possibilities that had not existed for young Indians, and older ones too, to branch out into new lifestyles, entrepreneurial adventures and careers. Those already in the middle class, including women, were given job opportunities and mobility of employment that was unimaginable in the economically restricted and public sector-dominated India after independence. No longer was the security of lifetime jobs in various parts of government and the public sector the epitome of success. For many of those not yet in the middle class, there were opportunities for upward mobility to be grasped.