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 This
article is prompted by the two articles, one by Ramachandra
Guha and other by Pratap Bhanu Mehta in Business Standard
6th Jan telling us that PM Dr Manmohan Singh who is an accomplished
Oxford Cambridge trained economist, better wake up or India
is going to go further down hill when it should be moving
up, and Manmohan Singh will go down as one of India's worst
PMs in his second term of UPA who has neglected governance
and tolerated corruption.
Dr Manmohan Singh is acknowledged as India's Finance Minister
who deftly averted India's de-fault on its external dues in
1991, and set India on a path of economic liberalization with
a dose of devaluation, which encouraged Foreign Direct Investments.
He instituted a dual rate of conversion of foreign exchange,
which witnessed no dearth of doubting Thomases, but it worked,
and much was accomplished because of the unstinted support
provided by PM Narasimha Rao, who knew 'the buck stopped at
his doorstep'.
Many attribute the credit of speedy implementation of policies
to Rao's Principal Secretary AN Verma in the PMO who held
weekly meetings and promptly cleared FDI proposals. Dr Manmohan
Singh is known to be cautious and takes decisions by consensus,
which can be time consuming, as has been experienced in his
tenure as Prime Minister. PM Narasimha Rao was a wily down
to earth politician who wielded power from PMO and gets less
credit than he deserves.
India's
economic changes implemented in 1991-92 were applauded world
over, but the story of how India's economic liberalization
began from Singapore in October 1991, needs to be recounted
as what followed saw 'India step out of the woods', and India
no longer needed to borrow commercial papers or hawk gold.
This time around India's economy is healthier, but again at
cross roads, as the Government is facing a large deficit and
resorting to borrowings as it has unfunded liabilities, especially
to pay for India's oil bill and defence purchases with a stronger
dollar. This time, the same Manmohan Singh is India's Prime
Minister and the 'buck stops with him'. India's external debt
has risen to $326.6 bn at the end of September and India's
foreign exchange reserves cover just 95.4 per cent of the
total external debt stock, against 99.5 per cent at end of
March
In
1991, the duo of Drs Singh and the current Deputy Chairman
of the Planning Commission Montek Ahluwalia as Finance Secretary,
proceeded to Bangkok with a begging bowl for the Annual Meeting
of World Bank-IMF Board of Governors held from 15th to 17th
October, also referred to as the Paris Club. Singh was the
Governor for India in both these institutions. Ahluwalia describing
the Finance Minister's plea at that 1991 meeting had this
to say,"We were able to project India's exceptional balance
of payment difficulties and the consequent loss of confidence
in India's economy, which had led to a freeze on new lending
by commercial banks, and continuing out flow of NRI deposits.
The withdrawal of these normal flows meant India faced a substantial
'unfilled gap' in India's external payments requirements.
Even on the assumption of substantial important restraint
unless these gaps could be filled, India would have to resort
to drastic import restrictions beyond the present levels which
would precipitate serious decline of industrial production,
severe shortages of essential products such as diesel and
kerosene and unavoidable pressure on prices. The unfilled
gap was projected at around $ 3.8 billion in 1991-92 and $
2.1 billion in 1992-93. The meetings at Bangkok also discussed
several critical issues in the areas of international finance,
including the prospects for mobilizing support for the reforms
in the Soviet Union". The Soviet Union had collapsed
and it affected India's economy too.
India
proposed it could meet the unfulfilled gap by a standby credit
from the IMF, combined with special fast disbursing loans
from the World Bank, and ADB support for India's structural
adjustment programme. Dr Singh also met the Finance Ministers
of Japan, UK and Germany and was assured that an IMF standby
loan of $ 2.2 bill over an 18 month period would be forth
coming in a meeting of the IMF board in New York. The duo
of the two Singhs, then flew down to Singapore to garner investments
from the 'Tiger Economies' and requested High Commissioner
Yogesh Mohan Tiwari to invite bankers and business men from
the region to an open forum meeting and asked India's Heads
of Missions in ASEAN to join.
The
same night then Commerce Minister Palaniappan Chidamabaram,
accompanied by a bevy of Indian Industrialists which included
Raunaq Singh, Thapar (Jr),and S L Kirloskar(Sr), Ram Buxani
and some bankers flew in with Special Secretary Economic Affairs
NK Singh, India's Power Secretary Geeta Krishnan (desperately
seeking funds for Maharashtra's Enron and India's Independent
Private Power Projects(IPPs)) and Chief Economic Adviser Deepak
Nayyar. At Dr Singh's request all were put up in Singapore's
down town Imperial Hotel at very economical rates, negotiated
to conserve FFE. As liaison officer to the entourage in this
writer did not realize he was witnessing economic history
in the making.
Whilst
in Singapore during Singh's stay around fair tidings arrived
from IMF that India's loans were approved, and the writer
escorted Ahluwalia to enable him to dictate and dispatch an
important note on behalf of Dr Manmohan Singh from the Defence
Adviser's office. In almost one breathe, Ahluwalia dictated
a two page note addressed to the Prime Minister Narasimha
Rao on behalf of Manmohan Singh summing up the economic predicament
India tabled in Bangkok quoted above verbatim, and the discussions
and the final achievement.
The note also cautioned that India would have to adhere to
the structural reforms that later propelled India on a path
of liberalization and assured PM that it would deliver India
out of the woods. Interestingly the current Secretary Commerce
Rahul Khullar as Private Secretary to Dr Manmohan Singh and
current Secretary Youth Affairs and Sports Mrs Sindhushree
Khullar as Secretary to Chidambaram were in the entourage.
This visit seeking investments from the Tiger Economies is
what later set in motion India's 'Look East' policy as a vibrant
strategic component of India's success laden foreign policy.
Much initial credit must go to Dr VS Arunachalam India's 11
year long serving DRDO head in 1991 who resigned later seeking
greener pastures, and his Adviser K Santhanam They moved swiftly
and garnered funds from cash rich Singapore for DRDO. Arunachalam
made visits and signed several training programmes and MOUs
for Singapore's military scientists and quoted for, and brought
Singapore Technologies Ltd 155mm gun with personnel for trials
to DRDO's Balasore firing range, outbidding Australia. Singapore's
military delegation led by Brigadier Da'Ranjo who headed Singapore's
Metro construction came to India accompanied by this writer
to explore joint collaboration in DRDO's LCA programme, the
Astra air to air missile, multi mode radar and invest in loss
making Bharat Dynamics Ltd. The delegation met Dr APJ Abdul
Kalam in Hyderbad for missile collaboration.
The Indian Navy commenced the Indo-Singapore SIMBEX exercises
which have gone on uninterrupted for the last 14 years and
Navy further collaborated and posted a navigation officer
instructor in Singapore's Armed Forces Training Institute
(SAFTI), and another in Singapore's multi nation Information
Fusion Centre (IFC) at Changi. India's Coast Guard posted
an officer in the RECAAP office of Regional Cooperation Agreement
on Combating Armed Robbery and Piracy in Singapore. All these
steps were supported by the current Deputy Prime Minister
of Singapore Rear Admiral Teo Chee Hean who advocated that
a benign strategic partnership with India would help trade
and investment. The DRDO and Navy made that come alive. Singapore
made investments in India and has supported India to move
in to the many ASEAN forums including the Asian Regional Forum(ARF)
which fosters dialogue on political and security concerns
in the Asia Pacific region.
Notably the final paragraph of that historic 1991 note read,
"For these reasons our performance under the IMF standby
and WB loan will be watched carefully to see if we meet the
milestones we have set for ourselves. The most important of
these is the target of containing the fiscal deficit in 1991
of 6.2% to 6.5 % of GDP. Progress towards this objective is
monitored every few months and failure to meet this objective
would jeopardize our credibility". What is remarkable
is Dr Manmohan Singh managed all this with courage and has
often admitted he changed his outlook from being a Fabian
economist to a realist modern day believer in globalization,
but with a heart for the poor, groping for a middle path.
Today as India's economist PM he needs to display that courage
which is needed to liberalise and pump up India's economy
to garner Foreign Direct Investments with confidence in India's
economy. It is again the need of the hour. When Prime Minister
Dr Manmohan Singh's economic council met leading industrialists
in the council, lamented that India's economic reforms were
losing momentum and steps were need to be taken to arrest
a decline in India's promising economy. Media banner headlines
called it an economic SOS, and China will take a big lead.
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