Denials sometimes have the strange effect of confirming what is sought to be disproved. One does not know if this was the case when the other day, Prime Minister Manmohan Singh ruled out India’s return to 1991’s balance of payments crisis.
On the face of it, there is no better person to say this because he was the one who helped the country come out in the past. But just as past performance is no guarantee for a repeat of success, today he would appear to be the last person who can help.
When Singh successfully tackled the previous crisis, he was the finance minister, performing his role like a bureaucrat, who could decide issues on their merit, without being weighed down by their political fallout. The politics of it all was left for his prime minister to handle, which P.V. Narasimha Rao did with great courage and conviction, never exposing his minister to the firing line.
Today, Manmohan Singh is in the saddle as an unlikely prime minister, who does not have the advantages of a politician and yet has lost the freedom of the bureaucrat. He appears virtually shackled, to the extent that when he waves to the crowd or in front of the camera, his hand movements look simulated.
Surely, Singh was responsible for executing the crisis management strategy, but the full credit for taking India out of the catastrophic situation must go to Rao. It is a different matter that in the dynastically oriented politics of India, his contribution has gone largely unrecognised.
When Rao, heading a minority government, took office, the situation was desperate. The balance of payments situation was critical and repayment of foreign debts seemed headed for default. Inflation had reached an alarming 16 per cent; industrial production was in shambles and exports had tanked.
Foreign exchange reserves were barely enough for seven days of imports. The situation brooked no delay and Rao took the plunge displaying uncharacteristic ruthlessness.
“Desperate maladies call for drastic remedies,” Rao declared in a televised address to the nation, which in retrospect has been likened to the most important speech since Nehru’s address to the nation on the eve of independence. The remedies began with a devaluation of the rupee in sequence over two days, accompanied by an austerity programme to cut expenditure, progressive deregulation of industry and de-licensing of the private sector, pulling down barriers to foreign investment, tax concessions to private corporations, slashing of subsidies, etc.
What followed in the next couple of years was one of the fastest economic turnarounds in modern times. Foreign exchange coffers began to fill up rapidly and industrial production boomed like never before. Inflation had been brought down to 9 per cent within one year while easing of government controls in service sectors such as communication and insurance, and the entry of private enterprise in infrastructural sectors such as aviation and telecom led to rapid growth in output.
By the end of 1995, India attracted more foreign investment than it did in the past four decades.
Can there be a repeat of all this? Yes, if someone like Rao gets the mantle. For, the man who did all this was a most unlikely person to have come to this position. He had virtually packed his stuff out of Delhi to go back to his Hyderabad home, hoping to resume his academic pursuit, a passionate interest, when one of his astrologer friends told him about the big changes coming. It all happened because the other leaders in the party did not trust each other and Rao appeared to be an innocuous choice.
Rao’s biggest strength was that he had nothing at stake and whatever came his way was a bonus. He had not even contested the elections when suddenly he was called upon to lead the government. More importantly, he had no dynastic baggage to carry and no obligation to bring the dynasty back to power.
He did not have one of his own, so he would not be constrained by family ambitions. He was virtually free of all shackles. And that did the trick.