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Mainstream, Vol XLVIII, No 28, July 3, 2010

Manmohan’s Progress

Saturday 10 July 2010, by Nikhil Chakravartty

With Parliament rounding off the general debate on the Budget, this is the point of time when certain reflections on the government’s presentation of the economic crisis before the nation may be in order.

Right at the outset, there was both curiously and appreciation on the Prime Minister having chosen a distinguished economist as his Finance Minister. An outsider in the arena of party politics, Dr Manmohan Singh raised expectations that he would present before the nation a fairly objective assessment of the economic crisis, its origins as well as the way-out of it. With the double-dose devaluation, Dr Singh got involved in a rather unreal argument with many other economists outside the official precincts when he tried to claim that his prescription for the economic ills facing the country was totally indigenous and must not be taken as having been dictated by the IMF.

This heroic effort carried little weight because it had already been an open secret for months that the negotiations for a substantial loan included quite understandably the conditionalities of the Fund-Bank type. This was evident also from the experience of Dr Manmohan Singh’s predecessor in office, Yashwant Sinha, who, as the Finance Minister of the Chandra Shekhar Government, had gone to Washington for the very purpose or arranging an IMF loan. The announcement of the new foreign trade policy, that followed the devaluation of the rupee, left no doubt that the government had perforce to bend to the conditionalities set out by the IMF. Then came the new Industrial Policy Statement, which made no bones about the urgent need to fall in the line with the IMF, here and now.

It is not that the country was not prepared for the removal of many of the controls on economic activity which had long outlived the purpose for which they had been imposed at the beginning and which over the years developed into a breeding ground of bureaucratic corruption. It is the totality of the reforms that the government brought forward and the manner of their introduction which debunked to a large measure Dr Manmohan Singh’s rather pathetic pleadings that he was not guided by the anxiety to placate the IMF.

Dr Singh had begun with fairly plausible credentials. As the Secretary-General of the South Commission, he was known to be trying to sensitise world opinion about the fearsome dimension of the Third World debt, about the experience of the Uruguay Round in tackling the world trade imbalance, and the negative character of the IMF with its conditionalities. Ironically enough, the very week that saw Dr Manmohan Singh present his Budget—preceded by the announcement of the new industrial policy—that very week found Julius Nyerere, the head of the South Commission, in New Delhi on his way back from Beijing. One wondered if the Chairman of the South Commission could convince himself with equal felicity about the line of consistency between the Commission’s views and Dr Singh’s prescription for our country’s economic ailment.

Then came the long-looked-for Budget. One has to confess that many of his friends and admirers were disappointed by Dr Manmohan Singh’s presentation speech as well as by the measures proposed. What one had been looking forward to was how he would utilise the occasion to unfold a new vista of India’s economic development alongwith an objective appraisal of our economic strategy and its application in the last four decades. He needs no introduction as one of our leading economists, widely renowned, who has long been associated with the government in many important capacities. With his experience and erudition, he evoked expectations that he would present a major testament of New Thinking for India’s march towards the twentyfirst century.

IT is against this background that the Budget—the speech and the proposals—were disappointing. Neat but pedestrian. There were plenty of emotional touches in it. In fact his very first sentence was a lonely-heart tribute to Rajiv Gandhi. Beyond that, however, the speech failed to take a broad panoramic view of India’s economic activity—an exercise that was expected from an intellectual of Manmohan Singh’s standing.

There were copious references to the unprecedented crisis, but no explanation worth the name about the reasons for the crisis. Further, he gave the impression of having equated the balance-of-payments crisis with an overall economic crisis. That can at best be a book-keeper’s view, not an economist’s wide-angle approach. Here was a great opportunity for an economic thinker to unfold before his countrymen the momentous opportunities opened up by resorting to New Thinking for preparing this great country for its role of destiny. In dismay one has to confess that Dr Manmohan Singh missed a great opportunity for himself, for his government and for the country.

Not being an economist but just a concerned citizen, the present writer is in no position to pass judgement on the measures that the Finance Minister has proposed. Comments and criticisms galore have already appeared and they will persist long after the Budget session. However, there are one of two aspects of his presentation which may be specifically noted.

For one thing, Manmohan Singh in his Budget speech has glossed over the reasons for the BoP crisis, saying that the present government “inherited an economy in deep crisis” and sought to emphasise that things started going down only after the Congress was displaced from power in November 1989. On the other hand, the Economic Survey which preceded the presentation of the Budget made it amply clear that the malaise should be traced to the profiligacy in the management of finances in the previous period, that is, during the Seventh Five-Year Plan. And there is good ground for believing that the Economic Survey itself was suitably “edited” under the present Finance Minister so that a frankly objective picture might not turn out to be damning for the previous government run by the party to which he recently joined on being taken into the Cabinet. Besides the fact that the five-month delay in the presentation of the Budget from February to July—which worsened the BoP crisis—was due to the Congress party’s anxiety to escape the responsibility for a harsh Budget before an election battle, does not of course find even a remote reference in the Finance Minister’s analysis.

This takes one to the very interesting impact of Dr Manmohan Singh’s joining the Congress party—a sort of structural adjustment for a scholar falling into the company of politicians and trying to keep up with the Joneses. As one read the Budget speech and his copious interventions—more than perhaps any other Finance Minister before him—he has repeatedly been swearing by “our party”. One can understand his complex on that score after having burnt his fingers in the very first round before the Budget when he honestly conceded that the Congress election manifesto promise to roll back prices to the July 1990 level in “the first 100 days” of a Congress Government was unrealistic. The flacks he got from his party colleagues for this piece of honest opinion seem to have made him wiser and that explains his repeated references in his Budget speech to the Congress’ election promises.

Much along the same line has to be seen the Finance Minister’s announcement of “Five New Initiatives”—a Backward Classes Welfare Corpo-ration; a National Renewal Fund; a National Foundation for Communal Harmony; extension of the navodaya programme for youth exchange; a National Committee for popularising South-South Cooperation—plus, to cap it all, the mammoth Rs 100 crore grant for the Rajiv Gandhi Foundation. Leaving aside the Rajiv Gandhi Foundation which has attracted due share of notice in Parliament, one wonders how this list of miscellaneous items deserve to be tom-tommed as “initiatives”. Do these Manmohan Initiatives point towards “the emergence of India as a major economic power in the world” as he promised in the concluding lines of his Budget peroration?

Controversies, misgivings and provocations a Budget in difficult times in bound to touch off, but what is indeed disturbing is that at the helm of affairs entrusted with the charge of providing a clear direction to the national economy, one finds a distinguished economist choosing to play the stereotype of a run-of-the-mill politician. In the life of a nation, rejuvenation has to come from the sturdy independence of the intellectual spirit. If the degeneracy of our politics can overpower our intellectual independence, that itself becomes a matter of utmost concern.

Is that the reflection of the sorry state of national morale today?

(Mainstream, August 10, 1991)

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