Victor Hugo once remarked: “We see the past in a telescope and the present in a microscope. Hence, the apparent enormities of the present.” This can be an overarching assessment of 25 years of India’s reform. The enormity of the change is telescoped while the complexities of the present loom large. Two episodes bring out the striking contrast. Given Parliamentary preoccupations, Arun Jaitley could not participate in the recent G-20 Finance Ministers’ meeting in China. However, 25 years ago this would be unthinkable. On April 11, 1991 the then finance minister, Yashwant Sinha, had at best a curt (almost impolite) meeting with his Japanese counterpart, Ryutaro Hashimoto and was advised instead to meet his senior official, the vice minister. The then vice-minister Makato Utsumi, who I recently hosted in Delhi, recalled those troubled times. He explained that notwithstanding the perceived discourtesy, the Japanese had in fact assured the IMF that they would act as the informal guarantor to emergency loans from the Fund to stave-off a looming debt default. What a transit in time and events.
From being a basket case of irrelevance, we occupy a vantage position in global decision making.
The other anecdote is about deepening consumer choice. After attending the annual meeting of the Fund Bank in Bangkok (15-17 October 1991), the then finance minister Dr Manmohan Singh addressed an investors’ conference in Singapore along with the then commerce minister, P Chidambaram. During the conference, the then governor of the Reserve Bank S Venkitaramanan invited some of us to accompany him to a shop in Singapore called Mustafa and Shamshuddin. This was a well-known address to Indians seeking household products which were not available in India, given impossible tariff and non-tariff barriers. Upon entering the shop, the governor proudly drew our attention to a notice stating that Indian currency was acceptable for payments. The significant Indian diaspora had made the Indian rupee convertible. More importantly, we were shown two floors in the store with pre-packed products, specially selected for Indian visitors, couriers, and operators. Each packet comprised of selected products such as cosmetic brands like Revlon lipstick, Lacoste T-shirts, jeans and household items not available to an average Indian. In sharp contrast today, Indian malls, even in sub-metro cities, routinely market high-end fashion brands. The opening up of the Indian economy and a rising prosperity curve has enhanced the bouquet of consumer choice.
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The broadened consumer choice extends to automobiles, financial services, household products and cosmetics represent a transition unimaginable 25 years ago.
It would however be naive to believe that we have overcome the past fully and met the crucial challenges to inclusive development. We act in fits and starts, driven many a time by compulsions, as much as convictions of likely gain.
The Narshimha Rao-Manmohan period concentrated on macroeconomic stability. It accepted conditionalities from multilateral agencies often by stealth, but many a time with halting political support. For instance, the commitments contained in the quarterly performance criteria given to the IMF while negotiating the structural adjustment loan with the World Bank for the upper credit tranche contained far-reaching changes in our banking and regulatory system, taxation policies including VAT and some ingredients of the GST, progressive opening up of infrastructure, dismantling of senseless trade barriers and broadening the scope for competition. From our point of view these were far reaching changes, the multilateral agencies many a time considered them to be grossly inadequate. We explained to them that in India, reforms by shock are hardly acceptable, except in deep crisis. The 1991 was one such deep crisis and the jury is out on whether we fully capitalised on this opportunity to make even deeper changes enveloping factors of production, which till today continue to elude consensus.
Nonetheless, we did manage to carry conviction that in India once you slightly open the door, the breeze flings it wider open. How else could one explain that the word privatisation was an anathema; we began by calling it a bundling of shares in the Budget of 1991. Even today, public-private partnership and strategic alliances remain the preferred route.
In the Deve Gowda-IK Gujral period, the emphasis shifted from tax policy reforms and commitments on further tariff and trade policy regime occupied priority. It was during the Vajpayee era that the telecom and infrastructure sectors were opened up and whose multiplier effects have resulted in sustained high rates of growth over a much longer period. This has also enabled a more abiding strengthening of macro fundamentals in multiple ways.
It is difficult to address the question of whether we have fully grasped the multiple opportunities which have come our way. Has our approach been tentative, stymied by domestic compulsions of one kind or the other? This was once explained to me by Manmohan Singh in a classic remark when I was pushing for a faster pace of disinvestment in the petroleum and oil sector. He told me, “please understand, governments must first survive before they can reform.”
We have once again begun to turn the spotlight on the missing ingredients to sustain not only high rates of growth but gainful job creation to make growth meaningful. We are racing against time, considering that productivity and technology are increasingly labour-displacing. The job creation compulsions and the need to address both the stock and the flow of joblessness pose multiple challenges. Improving quality of education, deepening the benefits on health outcomes by increasing use of technology, securing orderly urbanisation are areas which represent the priorities of the Modi government.
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It has been left to Modi to both telescope and microscope in his unique style of management and implementation. Modi fully understands that we cannot afford to run faster and faster to remain in the same place. We need a new orbit based on new compulsions and our comparative advantages.