It seems in the distant past but it is well to remember that, barely thirty years ago, there was one domestic airline (Indian Airlines), two telephone service providers (BSNL and MTNL), three cars (Ambassador, Fiat and Maruti) and numerous waiting lists for a telephone, gas connection, scooter etc. There were many scarce articles and commodities, the scarcest being foreign exchange. I traveled to the US to study for a Master’s degree on USD 7 a day for only 10 months a year!
Such was India’s economy in 1991. There was a political consensus on a State-controlled economy, monopoly or dominance of the public sector, import control, fixed exchange rate, licensing, and a suspicion of markets. No political party was an exception. The dissenters were those who leaned further to the left!
Inspired Choice
No political party was expected to win a majority of seats in the 1991 Lok Sabha elections. The Congress came closest with 232 seats. No one gave the government even a half-chance of successfully pulling India out of a grave economic crisis. The prime minister, P V Narasimha Rao, who had an uneventful career as a Cabinet minister, turned out to be a political wizard. His choice of Dr Manmohan Singh as finance minister was inspired. My appointment as commerce minister was, I guess, a nod to my MBA degree.
At the first meeting of the council of ministers, Narasimha Rao’s memorable remark to cabinet secretary Naresh Chandra was, “Naresh, have you found ghoda, gaadi for the ministers”? The first 10 days were dull and drab, with fear lurking around the corner if the (minority) government would be able to secure a vote of confidence. Time and tide wait for no man, not even the prime minister of India. India’s foreign exchange reserves were depleting, the threat of default was imminent, the unofficial exchange rate for the US dollar was soaring, exporters and importers had frozen in fear, and the tunnel seemed to grow longer with no light anywhere. The shrillest voices were from the left, clamouring for heavier doses of socialism. There was hardly any political leader pleading the case for economic liberalisation.
Six men (because it was a gender-unequal age) stood like a rock waiting for Lord Rama to step on the stone: Naresh Chandra, A N Verma, Mr Montek Ahluwalia, Dr Rakesh Mohan, Mr S Venkitaramanan and Dr C Rangarajan. They had made plans when the people were electing the 10th Lok Sabha. The first step was potentially explosive: devaluation. Dr Manmohan Singh tested the waters on July 1 with a 9 per cent devaluation. On July 3, deftly side-stepping the PM’s plea to freeze, he took the second step with a 10 per cent devaluation.
Breaking the Chains
Dr Singh put pressure on me and Mr Ahluwalia. We came up with a 13-point package of trade policy changes that was unveiled by me at a press conference on July 4. The trade policy announcements went beyond the remit of the commerce ministry. I spoke about matching steps in fiscal and industrial policy, foreign investment, de-canalisation of imports, abolition of most import licenses and convertibility of the rupee on the trade account! I also said that the PM and FM were “fully supportive of the measures”. The finance ministry found a new wind in its sails. The industry ministry pushed through the new Industrial Policy Resolution. The epoch-making budget was presented on July 24.
The two-and-a-half-person strong reformist political brigade faced fierce opposition in Parliament. None was more vocal in his criticism than Chandra Shekhar. In order to blunt the assault, I took the file in which he, as prime minister, had approved the proposals of the commerce ministry to liberalise trade policy, but which had remained unimplemented. He glanced at the notings and dismissed them as mere ‘proposals’ that were never meant to be implemented!
I plunged into making radical changes. We abolished the office of the Chief Controller of Imports & Exports. We wound up the Indian Trade Service. We made a bonfire of the Red Book, a thick tome that had strangulated a great mercantile nation for nearly 40 years. Toward the end of the year, Dr Singh ‘stole’ Mr Ahluwalia from me. I was sad to see him and Dr Y V Reddy leave to join the ministry of finance. I was happy, however, to receive Mr A V Ganesan, but Madhavrao Scindia, minister of civil aviation, was furious with me for ‘stealing’ his Secretary!
