This is the first of a five part series on economic reforms that transformed India
Some might think that this author has lost his mental balance. But I think Narendra Modi owes a debt of gratitude to the late P.V. Narasimha Rao because it was Rao, along with Dr Manmohan Singh who launched a "revolution" in 1991 that eventually enabled Modi to become Prime Minister in 2014. Simply put, Rao and Singh launched economic policies that created aspirational Indians and the neo middle class Indian; categories of people who voted in swathes for Modi in 2014. Much has been written about the historic economic reforms of 1991. Much more will be written. Lots of data crunching and analysis will be done. But decades from now, when history is written, 1991 will be marked as the year when Indians and India started dismantling the "Mai Baap" system of governance that has stifled the country for centuries.
When the current regime announced that citizens do not have to go with folded hands (often with currency notes tucked inside them) to "gazetted" officers for attesting their certificates, there was a deserved round of applause. This seemingly simple "policy change" signifies how significant 1991 was in beginning the end of the "Mai Baap" sarkar. In many ways, it also shows how fragile, time taking and frustrating are genuine attempts at reforming governance and economic policies. Around the same time that the late Rao nudged his finance minister to present the historic Union Budget of 1991, the UNDP had launched a novelty called the Human Development Index and started ranking countries. India featured at near bottom 25 years ago; it continues to feature at near bottom 25 years later. And yet, in the same 25 years, more than 300 million Indians have managed to escape poverty and have an opportunity to chase their own Indian dream.
These seemingly contradictory observations make 1991 even more significant. Before 1991, the government had virtually unlimited control over every aspect of economic activity. Stories in business media in that era were more about which business house was lobbying which powerful person in Delhi to get that elusive "license". In those infamous days of "license permit raj", managing to get a license or a permit was as good as getting the rights to printing money. It was a Kafkaesque world of Crony Socialism. The other important story for business journalists in that era was a term called "import substitution". Whenever a business house or a company managed a license to manufacture something, there would be no stories about how much money changed hands and who got the pay off. The stories were about how the domestic manufacture of "X" tons of something would save so many dollars of precious foreign exchange. Yes, business journalists and columnists invariably added the prefix "precious" to foreign exchange. The third kind of story in business media used to be about the "premium" fixed for the public issue (IPO) of a company. There used to be a Controller of Capital Issues in the finance ministry whose job was to decide the premium that a company could charge from investors while raising capital. Truly Kafka at its best.
The reforms launched by Rao and Singh in 1991 fundamentally transformed this system. The private sector was unshackled and Indian entrepreneurial energies were literally unleashed. Many Indian businessmen then became allies of Marxist parties because both were not happy with either globalization or global competition. They predicted a return of East India Company through the back door. Subsequent events showed Indian entrepreneurs were quite capable of not only handling global competition, but also creating global companies. Yet, as the disappointment with the Modi regime over "reforms" shows, the Rao-Singh duo executed only half the "revolution". Stalin or Mao style controls have gone; but the "State" still continues to play Mai Baap. Crony Socialism gave way to Crony Capitalism (remember 2G and Coal Gate?). Worse, the average Indian citizen, including the entrepreneur, still faces a hostile and extortionate state machinery. Look at how street vendors are harassed (even in Delhi led by the "revolutionary" Arvind Kejriwal) and you will know how 25 years of reforms still don't mean much for many Indians.
Modi has an opportunity to nudge finance minister Arun Jaitley with a Union Budget that could rival 1991. Will he?
Coming up in this series: India Before 1991; What Actually Happened In July 1991; The Unleashing Of India After 1991; and, The Persistence of Crony Capitalism.
