Manmohan Singh, The Accidental Politician Who Dreamed Big For India, Not For Himself

New India and its growing middle class owe a lot to Dr Manmohan Singh. He is the cleanest politician India has ever seen in the post-Independence era. Further, he is the biggest wealth creator for India. In the demise of Dr Singh, India lost a true believer in the country’s vast economic potential. Achieving the status of developed India is the right tribute to the man of simplicity

When India pledged its gold to borrow $405 million, a paltry sum for the country at current standards, in the early part of 1991, many thought that the country was heading for doom. For Indians, gold has a strong sentimental value. In those days, mortgaging gold was considered a bad sign and this decision to pledge gold reflected the depth of the financial crisis the country was in.

Frankly speaking, India was at the crossroads of political and economic uncertainties at that time. A caretaker government led by Chandrasekhar was at the helm. Chandrasekhar, known as Young Turk, broke away from the VP Singh-led Janata Dal with 60 MPs and formed government at the Centre in November 1990 with the support of Indian National Congress led by Rajiv Gandhi. But his government lasted only seven months as the Congress withdrew support over an alleged phone-tapping issue. The political situation was so pathetic that the Chandrasekhar government could not even get parliament’s approval for a full Union Budget in March 1991. The country headed for a mid-term poll and Rajiv Gandhi was unfortunately assassinated in Tamil Nadu on May 21 a day after the first round of polling was held. By that time, India’s financial position reached a precarious state as the Gulf War, which began in August 1990 and continued till February 1991, pushed petroleum crude oil prices to stratospheric levels.

India depended heavily on crude oil imports. It’s the same even now.

So, India had no option except pledging its gold to avoid defaults on its international payments as foreign reserves depleted. The Reserve Bank of India (RBI) transported 46.91 tonnes of its gold to London as a pledge to the Bank of England and Bank of Japan to borrow funds. The central government also sold 20 tonnes of its seized gold through State Bank of India (SBI).

Amidst such a gloom, Pamulaparthi Venkata Narasimha Rao, popularly revered as PV, became the prime minister on June 21 of that year. By pulling a rabbit out of the hat, PV chose noted economist Dr. Manmohan Singh as his Finance Minister. That remains the wisest political decision taken by an Indian Prime Minister since independence.

Dr. Singh did not come out of nowhere. He was the economic advisor to the Chandrasekhar government. In that role, he even prepared some documents for economic reforms, but they, like the Union Budget, did not get the parliament’s approval.

Incidentally, the dispatch of the pledged gold began after the PV government took charge. But it did not object as that was needed to stem the rot because foreign exchange reserves fell to a low of $600 million, just enough to meet import needs for three weeks. Of course, India could release its pledged gold a few months later, thanks to far-reaching economic reforms that the new regime initiated.

Dr Singh, in his maiden Budget speech as Finance Minister on July 24, laid solid foundation for the economic reforms. He advocated liberalisation, privatisation and globalisation (LPG), thus opening up the country’s economy to global investors. It was a bold move as the country had pursued socialist tenets till then.

The PV government also rolled out a new industrial policy, completely abolishing the dubious ‘Licence Raj’. Licensing norms for most of the sectors were removed. Only 18 sectors of strategic importance were kept out of the liberalisation process. The policy also incentivised foreign investments by allowing 51 per cent foreign equity participation. This move allowed foreign companies to set up shop in India.

The Centre also opted for dismantling public sector monopolies by listing public sector undertakings on stock exchanges, and also through disinvestment. It also diluted the MRTP Act (Monopolies and Restrictive Trade Practices Act) under which large companies came under the scanner by way of regular monitoring. The government also brought in far-reaching financial sector reforms.

Obviously, the new industrial policy and the 1991 Union Budget turned out to be big game changers for India. Besides attracting foreign investments, these reforms also bolstered entrepreneurial spirit in India. The country’s success in the labour-intensive information technology sector is a classic example of the benefits India has reaped in the post-reforms era. Thus, India’s service-oriented segment got a big boost.

Indian GDP, which was just $266 billion in 1991, has risen multifold to more than $3 trillion now as the successive governments continued the economic reforms. Dr. Singh’s efforts also enhanced India’s global image by several notches.

But one of the initial major steps taken up by Dr Manmohan Singh as Finance Minister was the devaluation of the Indian rupee. The Reserve Bank of India (RBI) devalued the rupee by nine per cent on July 1, 1991. Consequently, the currency was down from Rs. 21 to Rs. 23 against the US dollar. However, the apex bank did not stop there. A further devaluation of the rupee by 11 per cent was carried out two days later on July 3. This further reduced the value of the Indian currency to Rs. 26 against the greenback.

But I don’t think that the rupee devaluation was the right move. The country should have focused on improving efficiency instead of going in for currency devaluation to spur exports. In a way, India adopted an easy way to overcome the financial crisis.

On the other hand, China emerged as a global exports powerhouse without touching its currency. That’s the right strategy. Thanks to the rupee devaluation, India emerged as an export hub of human resources, but not much on the merchandise exports front! Still, the economic reforms turned the tide in India’s favour. They are doing so even now. They will continue do so into the future, as well.

Anyway, Dr. Singh got an unexpected elevation as the country’s Prime Minister in 2004 and remained in that position for a decade. It quite a remarkable facet that his stint as the Finance Minister still receives more accolades. Not to say here that he did not do much as PM.

His government brought in a plethora of game-changing legislations. Further, during his prime ministerial stint, he focused more on welfare and bridging the economic gaps in the country. Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), the National Food Security Act and Right To Education (RTE) best illustrate the visionary measures that he pursued.

Unfortunately, multiple scams and a policy paralysis that stemmed from these scams took the sheen off his government in the second term.

Still, new India and its growing middle class owe a lot to Dr. Singh. He is the cleanest politician India has ever seen in the post-Independence era. Further, the accidental politician is the country’s biggest wealth creator.

And he always dreamed big for India, not for himself. That’s a rarity.

In the demise of Dr. Singh on Thursday last, India lost a true believer in the country’s vast economic potential. Achieving the status of a developed nation is the right tribute to the epitome of simplicity, who famously quoted Victor Hugo in his first Budget speech-No power on earth can stop an idea whose time has come.

Looking back, we can say that with the opening of the Indian economy and the economic heights India has scaled, the remarks of Dr Singh, a true Bharat Ratna, have proved prophetic.