What are the milestones of the last decade? And where did the reforms
The biggest success is that we were able to turn conventional wisdom on its head. The conventional wisdom was that the State must tax and spend, the public sector was a better instrument than the private sector and that a Government-controlled economy assured a higher rate of growth. This has since been turned on its head. We have come a long way in the last ten years. Trade is more or less free, tariffs are coming down, market forces are at play in several sectors of economy, the private sector is playing an increasingly larger role, there's reward for entrepreneurship. As a result, the 90s witnessed the highest rate of growth (over seven per cent). The failures are that we are not able to sustain this process, we have not convinced the political parties and bulk of the poor people, particularly the rural poor, that this is the way to progress and prosperity. As a result, there has been resistance at every stage. In the last three years, there has been clear deceleration and in the last three months, it has come to a complete standstill. Ten years after the reforms started, if this country is in a bind and does not know which way to go, it's a sad commentary on the system and even sadder commentary on those who launched and articulated the reforms.
Which are the reforms you are happy with?
Trade reforms, abolition of licensing, opening of sectors that were closed for the private sector, reforms in the financial sector, introduction of competition in banking and insurance sectors are major milestones that anyone can be proud of. But so much more needs to be done. The entire infrastructure sector is still a prisoner of the government. We have done nothing to downsize the bureaucracy. We have tribunalised our regulatory bodies and bureaucratized our regulators. We seem to be reaping all the disadvantages of giving up government control and have introduced controls of another kind.
Narasimha Rao feels that liberalisation is at crossroads now and that the
message of the government is one of clearance sale...
I think Mr Rao was only an opportunistic reformer. It became clear when he (as Prime Minister) delivered a speech at that University in Germany on a middle path somewhere in 1994. I remember talking to Dr Manmohan Singh at that time and he was also surprised that he delivered such a speech. I think as far as he was concerned, the watershed was winning the vote of confidence. After that, his heart was not in reforms, it was in politics and how to get reelected. As a result, reforms did run into some obstacles in '94-'95. But we, both Dr Singh and I, persevered and pushed through some reforms. From what he is saying now, it's clear that he was neither committed nor convinced about reforms.
Did the reforms do in the Congress party?
No, the Congress lost the elections for a variety of reasons. Take one reason. They lost 40 seats in Tamil Nadu because they went into an alliance with AIADMK. They lost the elections because of state-specific issues and the overall perception of Mr Rao's government that it was willing to condone corruption. I don't think reformers necessarily lose elections. Chandrababu Naidu has won, so has Tony Blair.
Tell us your memories of those days? Was it very tough?
There were several tough moments. The first was devaluation. On July 3, 1991, Mr Rao felt that the second stage of devaluation ought not to have been done on that day. He tried to stop the second stage but nothing could be done because the RBI Governor had already issued the orders. But the first set of trade reforms was pretty easy. Dr Singh wanted me to announce the abolition of cash compensatory support (after stage two of devaluation) for exporters, but I said no Commerce Minister can start his career by abolishing this unless it is part of a package. So, we went across to Mr Rao. He heard out both of us and asked what is the way out. I told him it cannot be announced as an isolated step and must be part of a package of reforms. He said when will you be ready, I said this evening. By that evening, we drafted a 13-point package of trade reforms and took it across to Dr Singh and then to Mr Rao at his residence. I explained these 13 points very briefly to him and he asked Dr Singh, have you signed? Dr Singh then signed and he signed too. So, some things went as easy as that.
When the rupee was dropping sharply in 1995 and somebody had to speak up, Dr Singh asked me to do that. So I went to the office on a Sunday and held a press conference to exporters to bring back their earnings to cushion the fall of the rupee. In the UF government, there were some tough moments, one of them was the dismantling of APM. The other tough one was the PDS where our best option was to issue food coupons but most states were opposed to it. The next best option was introduction of APL/BPL (above the poverty line and below the poverty line). That took several weeks to negotiate through the steering committee and then the Cabinet. These were top decisions that we took. There were odd instances of the CPI and CPM and an odd socialist in the Cabinet posing obstacles, but by and large everybody recognized the need for reforms. We did not last long enough to follow through.
There is always a tussle between the reformer and the chronic capitalist and the reformer and the one who thinks State power is meant to make money. There was one big issue over the Tata-SIA (Singapore International Airlines) proposal. It was a big row in the Cabinet and at one point of time, Mr Maran and Mr Ibrahim were at each other's throats. It was obvious that successive Civil Aviation ministers had scuttled the entry of Tata-SIA only to serve certain vested interests. Today, there's a determined effort to keep out competition to Air-India and Indian Airlines, except that Jet and Sahara already have their share of the market. It's the same with Maruti. The disinvestment should have been cleared then, but was stopped by vested interests.
Why did the reforms fizzle out?
Lack of performance. Also, there are not enough people who are convinced about reforms — most people are convinced by the opposite. The reforms means electoral defeat and most people are convinced about that. Every government is being defeated, the BJP will be defeated in the next elections, not because of reforms but for other reasons. This is because people have high expectations and once they find that a government has served its term, it is voted out because people want a change.
Who do you think was the best reformer?
At the theoretical level, certainly Dr Manmohan Singh is the central architect of the reforms. But much of what he wanted to achieve was lost in implementation. Many sectors opened up subsequently and most investment came later and most of the regulatory agencies were set up later. There was a huge gap between his theoretical postulates and his commitment to reforms and his ability to oversee the implementation.
Why can't we have a committed team now just like in '91?
In 1991, I thought there were two and half reformers, the half being myself because I was Minister of State for Commerce. Now I know Mr Rao was the half reformer. In '96, we had more people accepting the rationale for reforms but unwilling to do it in their departments. Mr Vajpayee started off with a larger number of reformers in his Cabinet but he has lost them one by one. Today, I think he has a Cabinet of anti-reforms, a cabinet of no changes. It's like the Congress of 1921. There were two groups then known as no-change and pro-change. There's hardly anyone in Mr Vajpayee's cabinet who is pro-change. One can partly concede that Finance Minister Yashwant Sinha is pro-change, but if you look at power, petroleum or telecom, civil aviation, surface transport, railways, everybody is at least a status-quoist, if not one who wants a throwback to the past.
Do you think we got caught in our own success?
No, there's not much success to boast about. We had a foreign exchange crisis, a liquidity crisis and a stock market crisis. To some extent, the growth rate of seven percent (1994-97) induced some complacency. In 1997-98, it was hit by the Asian crisis and the domestic political crisis. After '98, Mr Vajpayee should have put together a team of young, committed members of his Cabinet. I think one last opportunity will be after he comes back from Mumbai. If he misses that, one can kiss goodbye to 2001-2001. After that, people will start clamoring for change. To catch up, five or six key ministries should bring in competent reformers, not necessarily see that as political handouts. You will see the impact on three indices — the exchange rate, inflation rate and interest rate. All three indices will be affected if the slowdown deepens and the confidence decreases. Every fact of reforms was under attack in recent elections in five States, but the Finance Minister or Commerce Minister, the Industry Minister, the Power Minister or Minister for Railways did not appear anywhere to defend the reforms. You would stand and speak for your policies, don't you? They did nothing.