In 1992, a cheerful Sikh man quickly climbed the podium at a legal conference in the central lobby of the Ashok Hotel, New Delhi. For an hour, without a piece of paper, he lucidly explained the complexities of India’s liberalization process. He carefully warned the ecstatic public that in order to support growth and stimulate investment – especially foreign investors – it was necessary “Create an environment conducive to growth”. The scholarly speaker well acquainted with the subject was Dr Manmohan Singh, then India’s finance minister, who was quickly pulling India out of its worst financial crisis.
In the previous year alone, 1991, India led by Prime Minister Chandra Shekhar was on the precipice of ignominious sovereign default. India’s international trade balance was hopelessly in deficit. Its external debt had doubled from $ 35 billion to $ 69 billion in 1991. India was short of money and time. It had less than $ 6 billion in foreign exchange reserves – just enough to cover about two weeks of the country’s imports. In May of that year, the State Bank of India sold 20 tons of gold to the Union Bank of Switzerland to raise around $ 200 million.
Domestically, the situation was just as grim. The budget deficit stood at 8 percent of gross domestic product (GDP). in a bad mooddowngraded Indian bonds. The government was unable to pass the budget. This resulted in a further deterioration of ratings, making it impossible for India to seek short-term loans, thus exacerbating the worsening economic crisis.
After the 1991 elections, the Indian National Congress and the UPA took office. Then Prime Minister Narasimha Rao asked IG Patel, the recently retired director of the London School of Economics, to become India’s finance minister. The latter declined the offer. Instead, he recommended his most remarkable protÃ©gÃ©, Dr Manmohan Singh, get the country out of economic slump.
Dr Manmohan Singh came to India as an uprooted child during the partition. Maybe the hardships he faced gave him the momentum to stand up. first throughout his sterling academic career in economy. He had his bachelor’s and master’s degrees in 1952 and 1954. He continued his studies in economics at the University of Cambridge. under the tutelage of two of the most influential and influential Keynesian economists, Joan Robinson and Nicholas Kaldor. Robinson and Kaldor were both strong advocates of how governments should combine development with social equity and make capitalism work in the wider public interest. These two formative influences would be mirrored dramatically in Dr Singh’s approach while making India’s economy a growth engine at full speed.
Dr Singh’s eternal quest for higher education would bring him back to the University of Oxford for his doctorate. His successful doctoral thesis in 1962 will form the basis of his book âIndia’s Export Trends and Prospects for Self-Sustained Growthâ.
Dr Singh, as Minister of Finance (1991-1996), inherited a devastating balance of payments situation and double-digit inflation. He made two economically sound, but politically volatile, decisions. The rupee was devalued twice in July 1991, first by around 9%, followed by another devaluation of 11%. With a devalued rupee, our exports have become cheaper, a course correction necessary for our worsening trade imbalance. As an emergency measure to close our current account deficit, the Reserve Bank of India pledged its gold holdings with the Bank of England raising around $ 400 million to avoid the current account deficit.
What followed was a series of reforms to the Indian economy which he rightly called âReforms with a human faceâ. The prelude was the dismantling of the Raj license with the introduction of industrial policy, 1991. Deep structural reforms were made with the implementation of negotiable exim certificates, breaking the noose of the Monopolies and Restrictive Business Practices Act facilitates enterprise restructuring by facilitating mergers and mergers, ending the monopoly of state-owned enterprises on imports and automatic approval of foreign direct investment in many sectors. All of these reforms required not only political courage and economic forethought, but also confidence that it could create an economic environment for Indian business and industry to thrive in the new international regime of globalized trade.
Still, “His policies were not a fundamental rejection of the Nehru-Mahalnobis model, but offered a pragmatic approach to achieve the same goals, including the integration of equity and social justice into economic growth.” writes Nicholas Stern and Shantanu Singh in the 4e volume of this impressive set of 5 volumes aptly titled “Changing India”. Dr Singh’s book reveals the trajectory of the economics scholar to that of a successful policy maker.
He knew, like all Keynesian economists, the central role government should play in an economy. In the last years of his tenure he would warn, âI’ve often heard it said that government doesn’t matter anymore because India will experience 9% growth. Unless the government acts quickly, growthâ¦ will be stuck at 5% forever. This warning has gone unheeded and is now visible in India’s dismal economic indicators.
2004 saw the Congress-led United Progressive Alliance (UPA) returns to power under the leadership of Sonia Gandhi who recommended the appointment of the Eastern Hemisphere’s most respected economist, Dr. Manmohan Singh â as Indian Prime Minister. He brought together the greatest economists and administrators of the time in his team. Most importantly, he inducted the brilliant MPC Chidambaram, holder of a Harvard MBA, as Minister of Finance. 2004 to 2014 were the 10 golden years of the Indian economy. India’s GDP grew at an average rate of 8.1% during this remarkable decade. Real GDP growth hit a record 10.08% in 2006-07, the second highest on record in independent India’s economic history, behind the record 10.2% reached during Rajiv Gandhi’s tenure in 1988-89.
What makes its achievement remarkable in the history of the world is that this galloping growth has been achieved on the model of responsible and inclusive democracy. Growth, unlike that of China, has not come at the expense of democracy or built on an edifice of authoritarian repression. If there is one unique and unprecedented achievement of Dr Singh’s deeply impactful work as Prime Minister Economist, it is the lifting 271 million people outside multidimensional poverty. This has not been easy. Dr. Singh’s two terms have seen the relentless and forceful enactment of several key pieces of legislation and the implementation of projects.
The National Rural Health Mission (NRHM) in 2005, the Unique Identification Authority of India (UIDAI) in 2009, the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MNREGA), the Right of Children to Free and Obligatory Education Act, 2009 (RTE), the Rajiv Awas Yojana (RAY) in 2011 providing housing for the poor and homeless in cities, the 2013 national food security law, the 2013 law on the right to fair compensation and transparency in land acquisition, rehabilitation and resettlement, which sought equity for farmers and those deprived of livelihoods due to land acquisitions, and the Right to Information Act 2005 are just a few of the actions taken.
Dr Singh’s enduring beacon was his deep and ongoing commitment to the wellness economy. What many critics like Jagdish Bhagwati and Arvind Panagariya, who lived in cozy comfort across the Atlantic, refused to see that NREGA and other programs, while reducing poverty, were also creating a demand increased and sustained domestic growth that was so critical in fueling growth.
The Nobel Prize in economics has a fundamental existential problem. The price goes to economic theorists. Even an exception, like Gunnar Myrdal, a former Swedish minister and influential policy maker, received the Nobel Prize for his academic work. He never went to those economists working at the political level. Indeed, the Nobel Committee believes that economics is an exact science and that financial models can be constructed like those of exact sciences like physics.
However, the ground-level economy – like that discussed by Dr Singh – is much more complex and must maneuver a national economy not just on theories, but through a thicket of constantly changing social, political and economic factors. evolution. Bringing the economy to mind-boggling growth rates, resulting in bold structural changes in the economy and simultaneously lifting millions of Indians out of poverty, is a mean and enviable achievement that is beyond both the compass and the means of any. theoretical economist.
Exactly 30 years have passed since Dr Singh helped India avoid a major economic crisis and put it on a high growth trajectory (2004-2014) to rival that of China. Now is the time for the Nobel Committee to take a look at the work of Dr Singh which has always achieved groundbreaking economic achievements without sacrificing democracy or undermining its faith in the ability of the economy to achieve inclusive growth in the world. altar of GDP acceleration. “All these years that I have been in office, whether as Minister of Finance or Prime Minister” recalls the discreet Dr. Singh, âI felt it was a sacred obligation to use the levers of power as a societal trust to be used to transform the economy and politics, so that we can get rid of poverty, ignorance and disease that still afflicts millions of people. people”.
In his last address to the nation of 1.2 billion men and women, after serving as prime minister for 10 years, he could confidently say that the “India’s emergence as a major power in the changing world economy is an idea whose time has come.”
It will have to be seen whether the time is right for the Nobel Committee to recognize Dr Singh’s 7 decades of work in academia, and thereafter, in the real world in real time, earning its spurs as one of the world’s leading economists. more formidable.
The opinions expressed above are those of the author.
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