What is the economic legacy of Manmohan Singh in India? Both the Left and the Right would like to remember him as the man who brought economic reforms and privatization to a state-dominated license-quota raj economy.
Singh himself would have preferred to be different. “What is the future of capitalism, especially in India?” Singh was asked in a 2009 Financial Times interview. His answer must have disappointed the market fundamentalists. “Capitalism with a human face. We are a mixed economy. We will remain a mixed economy. The public and private sectors will continue to play a very important role,” he replied.
Certainly, Singh’s ideas about a mixed economy were completely different from what his party, the Congress, tried to achieve when India gained independence.
The South Commission Report published in 1990 (Singh was the Secretary General of the Commission) provides some insight into Singh’s views on misplaced romanticism over state-led development strategies in the Third World.
The report states, “In many countries, the state has underachieved because it has tried to do too much, too soon… In such situations, the withdrawal of the state from some activities may lead to its failure as an instrument of development.” “Can increase effectiveness.” Said.
Also read: How did Manmohan Singh’s economic reforms change India?
Singh’s 1991 budget speech, perhaps the most important ever made in post-independence India, echoes this sentiment. “The public sector has contributed significantly to the diversification of our industrial economy. But there have been many shortcomings in it. In particular, the public sector is not able to generate internal surplus on a large scale. At this critical juncture, it has become necessary to take effective measures to make the public sector an engine of growth rather than an absorber or national savings without adequate returns”, it said. A new industrial policy was brought in with the Union Budget of 1991, which reserved a large number of sectors from public sector monopoly.
Singh played the most important role in this transformation of the Indian economy, first as Finance Minister in the Narasimha Rao government of 1991 and then as Prime Minister of India for 10 years from 2004 to 2014. GDP growth rates – external factors can emerge as major disruptors and some policies yield growth dividends only in the long run – are applied to judge Singh’s performance, his tenure was one of the most successful in India.
An academic turned technocrat, Singh entered the political arena and learned to deal with the constraints posed by politics in policy making. Narasimha Rao government was in minority. But the first opposition to dismantling the Nehruvian consensus on economic policy came from within the Congress Party. Most of the 1991 reforms were actually covert reforms, wrapped in rhetorical commitments to continue the old ways. While political expediency required that Singh demonstrate commitment to old supporters from outside, he was quite determined when it came to pushing his reform agenda from within.
in his essay Industrial policy reforms of 1991 and the way forwardpublished in the collection Transforming India: 25 years of economic reformsRakesh Mohan, former deputy governor of the Reserve Bank of India (who was then serving in the Ministry of Industry), provides an account of Singh’s determination to take the reform process forward.
“Within days of his appointment (as Finance Minister), Manmohan Singh called a meeting of all the Secretaries of key economic ministries and the Chief Economic Adviser…Manmohan Singh outlined a complete economic reform program which followed The next five years – and more importantly, the latter included immediate action on industry policy – whatever needed to be done to resolve the crisis. To make him the Prime Minister’s full The order was received… Since he was aware that some of the mandarins present did not agree with the kind of liberal economic reforms that were envisaged, he said: ‘If any of you have any difficulty with the proposed reform programme, So we can find other things for you!’ This was perhaps the most determined and powerful performance of Dr. Manmohan Singh so far.
welfare state
The first four years of the United Progressive Alliance (UPA) government, of which Singh headed, were spent relying on the parliamentary support of the Communists, who were the most consistent critics of economic reforms or neoliberal policies in India. In this phase, radical and progressive changes were seen in the social-democratic fabric of India. The enactment of the National Rural Employment Guarantee Act, the world’s largest demand-driven employment program and the Right to Information Act are some such examples. Welfare efforts would continue in the UPA’s second term as well, this time without the support of the Communists – they parted ways on the question of the India-US nuclear deal and on the basis of the better performance of the Congress party itself. And this will continue with NDA under the leadership of Narendra Modi.
The 2009 election results were perhaps the biggest political vindication of Singh’s vision of capitalism with a human face.
Things changed soon after the moment of glory. Although the 2008 economic crisis did not have an immediate impact on India’s growth prospects, the export engine of growth degenerated soon thereafter. This was accompanied by a sharp rise in commodity prices and what many economists believe was a delay in the withdrawal of the fiscal stimulus that was administered to deal with the 2008 crisis, making things very difficult for the Indian economy. . Inflation, fiscal deficit and trade deficit increased; Development slowed down. Appearing to be on the cusp of sustained double-digit growth, India joined the infamous club of five vulnerable countries whose macroeconomic fundamentals were in deep danger. The fact that the UPA did not take adequate steps to reform the governance structure in banks played a major role in the accumulation of bad loans in the banking system. This would emerge as a major obstacle to growth, creating a dual-balance sheet problem.
The post-2008 crisis was also a moment of reckoning for Singh’s economic philosophy of capitalism with a human face. With a decline in revenue growth and an increase in economic misery, which was largely the result of rising prices, his government found it impossible to balance macro-economics and welfare demands.
The best, and perhaps most stark, expression of this growing contradiction came from Singh himself in a 2012 speech in which, among other things, he tried to justify increasing the price of diesel and limiting the number of subsidized LPG cylinders. Went.
“…subsidies on petroleum products have increased significantly. it was Last year Rs 1 lakh 40 thousand crore. If we had not taken action it would have been over. Rs 200,000 crore this year. Where would the money for this have come from? Money doesn’t grow on trees. If we had not acted, it would have meant a higher fiscal deficit, i.e. an unsustainable increase in government expenditure relative to government income. If unchecked, this will lead to a steep rise in prices and loss of confidence in our economy,” Singh said.
Both the UPA government and Singh’s political clout could not recover from the economic crisis, which ultimately paved the way for the Bharatiya Janata Party (BJP)’s sweeping victory in 2014, followed by an even bigger victory in 2019. Certainly, the myriad allegations of corruption against various UPA ministers also played a role in undermining the credibility of the Congress, especially Singh, in the eyes of voters. Singh himself admitted that his hands were tied due to political reasons.
“My compulsion is that I have to endure a lot because we cannot hold elections every six months,” Singh was quoted as saying in a 2011 HT story. “Some compromises have to be made in managing alliances. Coalition government should be seen in the context that no single party has emerged to rule on its own.” He said, ”In coalition, coalition is dharma. Obviously things are not quite the way I want them to be. But to be honest, I never felt like resigning. I have something to do.”
Of all people, Singh should have realized what the consequences of such politics would be. Once again, the 1990 South Commission report, which Singh played a key role in writing, was prescient. “Politics cannot be ignored in the management of development. But if it is to be constructive then politics should be a servant of social sympathy. It should be an instrument of purposeful social change rather than a ticket to power and privilege or another lucrative profession.
In a media interaction in January 2014, a few months before the Congress suffered a crushing defeat, Singh made a bold attempt to defend his legacy. “I honestly believe that history will be kinder to me than the contemporary media, or for that matter, the opposition parties in Parliament. I cannot disclose everything that happens in the cabinet system of government. I think, keeping in mind the circumstances and the compulsions of coalition politics, I have done my best in those circumstances.
Whether the Congress party and Singh’s legacy will be able to regain its lost glory is a question best left to the future. However, one can say with a fair level of confidence and gratitude that Manmohan Singh played a significant role in transforming India’s economy from the shackles of misconceptions of state-led transformation to a market-oriented one without any major disruption and collateral damage. Had played. There are too many examples of failed shock therapy and lost decades, which are the result of complete dedication to the zeal of the proponents of the Washington Consensus, which teaches us that India should always be grateful for the fine balance that Dr. Singh struck. He set out to achieve – and did.
