The enormous contribution of former prime minister Manmohan Singh in steering economic liberalisation and the Indian economy’s growth is universally appreciated. However, his decisive leadership in bringing light to the lives of millions, ushering in a solar power revolution, steering India out of the shock of the 2008 global financial crisis and taking India to a higher level of industrial development are not that well known.
With great difficulty and a prolonged process of consensus building, the landmark Electricity Act 2003 was enacted to regulate the power sector. It was among the major reform legislations brought in by the National Democratic Alliance (NDA) government.
In 2004, after the United Progressive Alliance (UPA) government came to power, many were dismayed to find the intention of reviewing this law in its common minimum programme, included at the behest of the Left.
Seeing the merit of the legislation, which had been supported by the Congress when it was in the opposition, Singh was steadfast. The review was pro forma and a couple of minor amendments were made to satisfy the commitment to the Left.
Singh went against his own ministry to electrify villages
In 2004, India had 125,000 unelectrified villages out of a total of 600,000, with over 400 million people lacking access to electricity.
Electrification of new villages, which was the responsibility of state governments, had been practically at a standstill. All these villages were in states such as Bihar, UP and West Bengal, which were being left behind in economic development.
In a transformative decision in 2005, Singh’s government took on the responsibility of financing rural electrification. Going one step further, the government decided to use central undertakings to execute projects and supplement the execution capacity of the states.
Singh used his prime ministerial authority to get the Cabinet to approve this national rural electrification mission against the advice of both the finance ministry and the planning commission.
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They had reservations about taking over a state responsibility and committing huge sums of money when resources were constrained. More importantly, the country was beset with power shortages already and there would be no power to give after electrification.
However, India was able to give electricity to all households by 2020, two decades before the optimistic assessment of the International Electricity Agency (IEA) in the early 2000s and in what they described as a ‘historically unparalleled’ achievement in extending electrification.
Thanks to the surge in private investment in electricity generation, facilitated by the liberal provisions in the Electricity Act, the country also saw much fewer power shortages.
Foresight in a financial crisis
In 2008, when the global fiscal crisis sent all developed economies into a tailspin, the initial view in Delhi was that India would remain unaffected.
But India’s integration with global financial markets meant that it was not immune to this external shock. Singh ascertained that the Indian economy was going down sharply and tasked four key secretaries to meet every day and work out a plan.
Within weeks, a comprehensive set of stimulus measures to generate domestic demand and get the economy out of the external shock were approved and implemented.
The RBI governor was also privately persuaded to implement a far larger interest cut than he was contemplating. The stimulus package worked far better than expected. The economy slowed down for only two quarters and regained its earlier growth momentum in 2009.
Push for solar power
Seeing the impending disaster from global warming, Singh decided in 2009 that India should begin its transition away from fossil fuels. For this, it should aim to create 20,000 megawatt (MW) of solar capacity in a decade.
This was a truly daunting challenge – India’s capacity at the time was barely over 100 MW, solar power was four times more expensive and there was no money to subsidise such a large program.
Yet, the National Solar Mission was launched. Its innovative design began delivering impressive results. Today, India can be proud that it has over 90,000 MW of solar power generating capacity.
Unorthodox decisions
Towards the end of his tenure, Singh recognised the need for the state to play a greater role in driving growth. He made some unorthodox decisions. His Cabinet decided to give about 40% of the capital cost of a chip-building plant as an interest-free loan. For a variety of reasons, this investment did not take place. However, the essence of this idea is now being used to lure investments in semiconductors into India.
The design, development and manufacturing of a domestic, medium range civilian aircraft with full public funding in a public-private partnership (PPP) was an innovative decision that he took in 2013.
This would have been the first PPP in manufacturing with Indian firms who would be partners from the outset. The domestic design capabilities that had been developed for defence aircrafts would have been used for it.
The plane was to be designed after choosing an engine with the least life cycle running cost from global suppliers. However, with the change in government and personnel, this was not pursued.
Singh believed in the merit of due process and free discussion. He was acutely conscious of the complexity of the challenges before India, something that reflected in his decision-making process.
Ajay Shankar was Secretary, Department of Industrial Policy and Promotion in the government of India.
