I am delighted to have this opportunity to release a collection of essays in honour of my esteemed friend and our Finance Minister Shri P. Chidambaram. The book, edited by Sameer Kochhar of the Skoch Foundation, contains a number of excellent essays by well known distinguished experts.
I noticed that all the authors date their association with Shri Chidambaram from 1991, when he was our Minister of Commerce, and a key ‘reformer’, initiating trade policy reform. I have known him as a ‘reformer’ from even earlier.
In 1986, Prime Minister Rajiv Gandhi appointed him as the Minister of State for personnel, and later for internal security. In both these capacities, Shri Chidambaram pioneered key reforms in our processes of governance. Under Rajivji’s guidance he launched a mid-career programme for civil servants, sending officers to IIMs and other teaching and research institutions. Many civil servants told me that they highly appreciated the opportunity to return briefly to academic pursuits, and benefitted greatly from this experience.
Shri Chidambaram and I were Cabinet colleagues in Shri Narasimha Rao’s government when I was Finance Minister and the reforms of the 1990s were initiated. I recall that Shri Chidambaram was one of the strongest advocates of economic reforms whenever the programme came under attack, both in the Union Cabinet, and also in the wider political arena.
Academic economists who have written about economic reforms in India tend to see the process as an acceptance of technical recommendations which have long been advocated by economists. However, reforms don’t happen just because there is a professional consensus. They happen when the political leadership of the time decides to back these initiatives.
In a democracy, reform – be it of economic policy or of institutions – is essentially a political process. We have to build a sufficiently wide political consensus in favour of the policies we wish to adopt. Having a parliamentary majority alone is not enough, because there are differences within parties. For reforms to be credible it is necessary that a wide cross section of society should understand the need for and accept the policy changes that a government wishes to introduce.
The 1991 reforms did not happen suddenly. They were preceded by a push in that direction in the second half of the 1980s, by the Congress government under the leadership of Shri Rajiv Gandhi. The Congress Manifesto in the 1990 election also gave a very strong reform message. When the Congress government was formed in 1991, under Prime Minister Shri Narasimha Rao, his leadership and support for reforms was equally crucial.
After 1996, we had a non-Congress government with Left Front support, under the leadership of Shri Deve Gowda and later Shri I K Gujral. The policies we had implemented in 1991-96 were not only not reversed, they were in many respects even taken forward. This must have been helped greatly by the fact that Shri Chidambaram as Union Finance Minister in the United Front Government, contributed to a continuity of policy. But I also like to think that it reflects the fact that beneath the loud disagreement and debate that is characteristic of democracies, there is also a growing consensus.
In one of the essays in this book, Montek Ahluwalia has given a detailed account of Shri Chidambaram’s role in the trade policy reforms of 1991. He was Shri Chidambaram’s Commerce Secretary at the time, and his account is therefore an insider’s view of the truly dramatic changes in trade policy that Shri Chidambaram introduced. The fact that within a few weeks of taking over his first economic Ministry, he brought about radical changes in trade policy, which many academics had advocated for many years, is a tribute to the high qualities of his leadership.
Montek draws six lessons from that experience, which he points out are very relevant today. I think, these lessons are worth recounting: