Manmohan Singh – The Misunderstood Warrior

Nov 01, 2013 No Comments by

Manmohan Singh has been criticised by one and all, for all kind of reasons. But that is only one side of the picture. To make our theory not sound baseless we would first present some facts and then examine them. We all are aware of what happened in India in 1991. To keep it simple we ran out of cash to pay other countries for the goods we bought from them. There are many reasons for it like pegging of rupee, Gulf war, breaking of Soviet Union etc. But that is not the prime focus of this article. Let’s see what the government did to solve this crisis:

  • The government straightaway went to IMF and asked for a loan of $2.2 billion. For this 67 tonnes of gold had to be airlifted as collateral.
  • In return IMF had put some policy measures which India needed to take like removal of licence raj, opening up the economy etc.
  • The government took the initiative and implemented policies to open up India’s economy. This marked a shift from socialist to capitalist approach.
  • The new policies opened India for international trade and investment, deregulation, initiation of privatisation, tax reforms etc.
  • The government also devalued the rupee and slashed subsidies for domestically produced goods.
  • The government entered into an understanding with the Reserve Bank of India to deny itself the right to ‘draw’ on the RBI to fund its deficit. This put paid to the unlimited monetisation of the fiscal deficit.
  • The government made life easy for entrepreneurs by introducing more competition, simplifying the tax structure and creating a healthy business environment.
  • They laid stress on macroeconomic stabilisation and opening up trade and payment system. They thus put in place a macroeconomic adjustment program with the active support of International Monetary Fund. The program combined monetary, fiscal, and exchange rate policies to reduce India’s gaping internal and external imbalances. IMF played a critical role in assisting India during its period of crisis.

The list can go on and on but we think we have given you an overview of what the government did. Now we have to understand that When Narsimha Rao came to power in 1991, he roped in Dr. Manmohan Singh to be the Finance Minister. This was his first stint in politics and very reluctantly he took the post.

Implementing these policies might look very easy on paper but we have to understand the condition of the country at that point.

  • Many people don’t know that attempts were made to liberalise the economy in 1966 and 1985 but they failed.
  • Assassinations of Indira Gandhi in 1984 and Rajiv Gandhi in 1991 had led to political instability in the country. For this reason even after opening investment opportunities it was very difficult to convince foreign players to invest in the country.
  • Dr. Singh had to maintain a balance between foreign investments and economic growth of the country. A mistake by him would have made India over dependent on foreign countries. This might have led to another East India Company coming and taking over the nation.
  • India had also taken loan from IMF. So, IMF was riding on India’s back to form policies according to their guidelines. While framing the policies Dr. Singh had to keep in mind to please IMF and not to compromise with India’s long term interests. Finally, many reforms which the IMF wanted were not implemented.
  • The society at that time was very rigid. So, to do away with many socialist redundant policies was not easy. He must have faced alot of criticism and protest.

The way Dr. Singh handled the crisis proves his credibility as an economist and a policy maker. Whatever India is today, a major credit goes to Mr. Singh for doing the right thing at the right time. Many critics tell that he just got lucky that he was there at the right time. Let us give you an example. India is a cricket loving nation. So, let us take the example from cricket. India is playing Australia in a 50 over match. It is the last ball of the match and India needs 4 runs to win. Dhoni is on strike and he hits a four. India wins. Now will you tell that Dhoni just got lucky that he was there at the right time? The player playing the last ball had to seize the opportunity and hit a boundary to make sure India wins. Similarly, Dr. Singh got an opportunity and he seized it by implementing the policies in the best possible manner. If there was someone else in his place we don’t know how he would have fared. So, we should give him the respect and credit he deserves for applying his brain.

I can’t stop myself from wondering what would have happened if in 2004 instead of making him PM, UPA would have made him the Finance Minister. It is quite possible that the growth would have been consistently above 7%, no inflation problem, rupee at 40, Nifty at 10000, Sensex at 35000 etc. A Prime Minister has many responsibilities. So, while being the PM Dr. Singh could not have given his 100% in making the economic policies. He has been criticised numerous times for staying silent and for all the wrong reasons. In our view it is like telling Ashish Nehra to open the batting and then telling him why did you get out on zero?

We despise UPA government for numerous scams they had in their tenure. But we despise UPA even more for keeping this great economist away from the job which suited him the most. ‘TIME’ will tell how big a price India will have to pay for this.

 

 

Economy

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