Glowing tributes are being paid to Manmohan Singh. Not only it is an Indian tradition to praise the departed, but much has changed since he demitted the prime ministership following the rout of the Congress in 2014. The United Progressive Alliance (UPA)-II headed by him was characterised by policy paralysis and non-performance and that was exploited by the BJP and Narendra Modi. But today, Singh comes across as a democrat and the contrast with the present times is stark.
Today, freedom is under attack, the functioning of democratic institutions is stressed and relations among communities are so fraught that social and political tensions have reached new heights.
The autonomy of universities, the media, the judiciary, the police, etc. is being dented so as to further the agenda of the ruling party. Appointments to important positions are based on personal loyalty. The PM seems to be perpetually on campaign mode and his speeches are often not in keeping with the dignity of the high office he occupies.
Today, critics instead of being appreciated are labelled as anti-national. A foreign hand out to destabilise India is seen behind many NGOs working with marginalised groups.
The future of democracy looks bleak, while it was thriving under the UPA, even if it was somewhat chaotic. Corruption of the high and mighty was being exposed then, while today it remains under wraps due to the tight control kept on officialdom so that the media is unable to access it. The PM prefers fixed interviews rather than press conferences, unlike in earlier times.
What underlies this rapid transformation in the power structure and people’s consciousness? Why have the checks on the unbridled power of the PM again dissipated? No doubt it is a result of the opposition’s weaknesses. These are two sides of the same phenomenon and Singh, who was at the centre of power for much of the 30-plus years prior to 2014, has to share responsibility for it.
Rightward drift
Since 1971, Singh occupied important positions in government. First as a bureaucrat implementing policy and then as a policymaker. He was a part of nearly every government till 2014 and that testifies to his capacity to adjust to the various hues of policies.
The left-of-centre policies of the early 1970s gave way during the Emergency to right-of-centre policies. This trend accelerated with the Janata government and became consolidated with the new economic policies (NEP) implemented in 1991.
When Indira Gandhi returned to power in 1980, India faced a balance of payments (BOP) crisis. It had to seek the IMF’s help and agree to its conditionalities, like the liberalisation of imports, the relaxation of controls and the promotion of consumerism. This caused foreign debt to rise from $10 billion in 1980 to $93 billion by 1989.
Also read: The Silent Strength of Manmohan Singh as Prime Minister Was His Moral Compass
Initially it was financed by long-term borrowing, but from 1985 it was replaced by short-term borrowing, which dried up in 1988-89 with the oil crisis hitting the world. A BOP crisis ensued and the rupee weakened, leading to the increased flight of capital. Foreign exchange reserves declined all through 1989-90 in spite of loans from the IMF.
Could Singh as RBI governor as well as Planning Commission member (1980-82) and deputy chairperson (1985-87) have cautioned the government about such opening-up? After all, the report of the South Commission headed by Julius Nyerere, of which Singh was secretary general, had (in a widely quoted paragraph) cautioned the developing world against seeking IMF adjustment as this would be disastrous for it.
Yet, as soon as he took over as finance minister in June 1991, India accepted IMF conditionalities. The BOP crisis immediately eased because foreign banks started to lend to India and the flight of capital declined.
The World Bank by 1989 realised that India was headed towards a crisis and had prepared seven reports on what India should do regarding trade, industry, finance, etc. Former Prime Minister Chandrashekhar accused Singh in parliament that as his chief economic adviser, Singh had not shown him these reports.
Singh rapidly implemented these readymade policies and the crisis eased. For instance, a devaluation of the rupee by 23% was recommended and India implemented that in two steps on July 1 and July 3, 1991.
Since Singh had flagged the long-term impact of conditionalities in the South Commission report, he could have modified them to soften the impact on the marginalised sections. The conditionalities were known to be pro-business and even the World Bank had realised by the mid-1980s that these policies, termed as the Washington Consensus, would aggravate inequality and poverty. So it had suggested setting up ‘safety nets’ for the poor.
But, invoking ‘TINA’ (‘there is no alternative’), the NEP were implemented without safety nets.
The NEP were opposed by trade unions, opposition parties and NGOs because of their adverse implications for the marginalised. Bharat bandhs were organised every six months till late 1994. An alternative budget spelling out the alternative to the NEP was presented to an assembly of citizens in 1993 and 1994. Yet, Singh went ahead in spite of these cautionary voices.
Opening up the economy
The NEP were justified on the grounds that the Indian economy was closed and that was why it faced a crisis. The corollary was to open up and align with the Western bloc. The collapse of the Soviet bloc enhanced the relevance of this idea. So, India embarked on marketisation, with the state retreating from the markets.
But India in 1991 was as open or closed as Japan, the US and China. The openness of an economy is measured by the share of its exports and imports in the GDP and for all these large economies, it ranged between 6% and 9%, similar to India’s. So, this argument was just a ploy for pushing the paradigm change in policies.
Following marketisation, the stock market became the yardstick of the success of economic policies. Post-NEP, when the economy was tanking, the stock market was booming. When questioned in parliament, Singh stated, “I won’t lose my sleep over the stock market”. For Harshad Mehta, the big bull, this was the cue to continue his stock market manipulations. Singh also met Mehta in the finance ministry in February 1992 and agreed to exempt the holding of shares from wealth tax, further fuelling speculation.
The bubble burst on April 6, 1992 and the Harshad Mehta scam came to light. The Janakiraman Committee Report estimated its size to be Rs 3,124 crore – the largest scam of the 1990s.
In brief, India swung further to the Right in economic terms post-1991. This had already taken place in political and social terms and these three trends reinforced each other.
Also read: The One Mistake Manmohan Singh Made on the Economic Front Cost Him – and the Congress – Dearly
Implications
What does swinging to the Right imply? It is the removal of equality and equity from the policy agenda. The celebration of greed, fuelling speculation, consumerism and atomisation. The promotion of the interest of businesses, whether national or multinational corporations, rather than of the collectivity. The motto became ‘grow the pie first’. It was said, ‘don’t distribute poverty’.
The public sector had to retreat to make the market available to the private sector for its growth. Employment, education and health had to be obtained from the market. The state’s responsibility for providing these to the marginalised sections declined. Social sector budgets were curtailed, leading to growing privatisation in the fields of education and health.
So, there has been inadequacy of public health facilities, as revealed during the pandemic, and poor standards of public education, as revealed by Annual Status of Education Reports.
The rising black economy and corruption led to policy failure and disenchantment with government. Large scams took place during Singh’s finance ministership from 1991 to 1996 and during his prime ministership from 2004 to 2014. This sullied the image of both the Congress and of Singh.
The right to information (RTI) was one way to tackle corruption and an Act was passed in 2005, but it kept the top ruling echelons out of its purview. The Whistle Blowers Protection Act, an essential accompaniment to the RTI, was passed in 2014 and diluted by an amendment in 2015. These dilutions undermined the effectiveness of RTI.
The UPA implemented the various ‘safety net’ provisions under the rights to food, employment and education. But Singh and his two senior colleagues on economic matters resisted them since these were not in consonance with market functioning. They also invoked the shortage of resources.
However, Sonia Gandhi, the head of the National Advisory Council, stood firm and these rights were adopted.
Inability to be firm
Corruption, inequality, poverty, unemployment and policy paralysis during UPA rule were invoked by Modi before coming to power in 2014. Letting these issues fester eased the path of the Right. Even to this day, these earlier weaknesses are used to divert attention from the present day non-performance of the government. They are also used to threaten the opposition leadership with prosecution so as to prevent them from developing a counter-narrative.
Singh was squeaky clean but did not check corruption all around him. Any number of examples of his honesty and simplicity are presented by his admirers. But, honesty is indivisible – it has to be systemic and not just personal. This weakness manifested itself during his term as FM and as PM. He also could not rein in his ministers.
The nationalist-minded businessmen who saw the danger of the indiscriminate opening up of the economy formed the Bombay Club. It folded up prematurely due to government pressure. The opportunity it provided to Singh to soften the NEP by claiming resistance in the country was not exploited since he could not stand against the pressure from foreign capital.
Unlike China, which exploited the WTO after joining it to become a superpower in two decades, India did not move strategically.
Singh could have tested the waters by acting more firmly. After all, Sonia Gandhi also needed him. For example, as a former academic, he could have insisted on greater allocations to education and health to fulfil the goals of 6% of GDP for education and 3% for health. The secret of China’s dramatic rise lay in its prioritisation of these social sectors and R&D.
Marketisation also led to growing consumerism post-1991 and helped the ruling establishment divert the people’s attention from the real issues of unemployment, price rise, etc. It favoured the organised sector, which led to rising unemployment and inequality. It has caused the share of profits in the GDP to rise and fuelled inequality.
This has narrowed the base of growth, which has not only made it unstable, but dependent on foreign markets and foreign capital flows and in a vicious cycle that requires giving more and more concessions to businesses.
Conclusion
Tributes to Singh as a person are well-deserved, but the focus needs to be on his contributions to the nation’s journey. As an economist, he knew of the adverse impact of the paradigm shift he set in motion in 1991. He wrote about it in the South Commission report. If he had been more firm and helped moderate the impact on the marginalised, today the Right may not have become the dominant force in Indian politics and society.
In the 1980s too, he did little to head off the impending crisis that analysts were pointing to.
His contribution to policy was the implementation after 1991 of the World Bank and IMF programme on behalf of international finance capital. That endeared him to these forces and the Indian elite, which wanted to link up with the global elite. This led India into the strategic orbit of the US rather than towards an independent path and into marketisation and atomisation, which helped the Right to push its ideology.
Equity was dropped from the policy agenda so that the welfare of the collective was pushed to the margins. All this created the fertile ground for the nation to swing to the Right.
Arun Kumar is author of Indian Economy Since Independence: Persisting Colonial Disruption.
