Late Manmohan Singh was a complete economist: KM Chandrasekhar

Manmohan Singh will be remembered by posterity as the architect of new India, as the man who, in collaboration with Prime Minister P.V. Narasimha Rao, changed the face of the Indian economy. Many times, when, as PM, he was downcast, I used to tell him, “Sir, a hundred years hence, you will be considered the leader who changed India, who put us firmly on the path of growth.” I am strongly of the opinion that the Manmohan Singh era will go down in history as the one that changed the image of India, not merely in the economic sphere, but in every other aspect, making India a respected global power today, economically and politically powerful.

I recall that in the early ’80s, when I went to the University of Leeds for a training programme, India was no better than a third-world country. India found no mention in any leading British newspaper. By the end of the ’90s, when I was posted first to Brussels, then to Geneva, the situation had changed dramatically. Rarely did a day go by without the mention of India. Investment interest in India had grown significantly. Throughout my tenure as Ambassador to the World Trade Organization, there was intense pressure on India to open our large and prosperous domestic market.

The evolution of Singh’s economic thinking is an interesting study. He began his career working in the foreign trade ministry as an advisor to then Minister L.N. Mishra. This was followed by tenures as Chief Economic Advisor in the Ministry of Finance, Governor of the Reserve Bank of India, Secretary in the Ministry of Finance, and Deputy Chairman of the Planning Commission. In 1987, he became Secretary General of the South Commission in Geneva, then headed by the Fabian socialist Julius Nyerere, former President of Tanzania. Nyerere strongly believed in different strategies for rebuilding the developing world, and he was against unquestioningly imitating the methods followed by the developed countries.

Thus, there was nothing in Singh’s career path to believe that he would go down in history as a great liberaliser who would open up the Indian economy.

The South Commission, helmed by Nyerere and Singh, produced a report in 1990 titled “The Challenge to the South”. The Commission firmly believed that mere growth in GDP or in per capita incomes does not signify development. Development means greater prosperity and better quality of life for all, not just wealth for a few at the top of the income pyramid. The report said, “The declared purpose of development was the eradication of poverty, ignorance, and disease. A large number of developing countries adopted as models developed countries which had by and large banished those evils. And, as these countries appeared to set great store by the rate of GDP growth, most countries in the South tended to use it as the yardstick of performance. Increases in the rate of GDP growth became almost a goal in themselves; for practical purposes, they came to define development. Most developing countries failed to see that such figures could conceal poverty, suffering, and injustices that were the very ills they were eager to cure. They did not take into account the very different circumstances in which the South was attempting to develop. Placing too much confidence in the theory that growth would trickle down, they took little direct action to improve productivity and raise the incomes of the poor or to ensure a less unequal distribution of the benefits of growth through such programmes as land reform.”

This was probably the reason why he did not set great store by GDP growth per se. Even though the economy had grown to $1 trillion by 2010 and to more than $2 trillion by the time he left office in 2014, we did not hear much of a song and dance about it. Singh’s policies were, therefore, supple and flexible; he could blend supply-side economics with measures to bolster demand and improve the living conditions of the lowest strata of society.

Never was this more apparent than in the 2008-09 “great recession”, when he was also holding charge as Finance Minister. This catastrophe, triggered by the US subprime loan crisis, had brought the developed world to its knees. India, which was growing increasingly integrated into the global economy, could not escape the reverberations. He responded with a set of measures that would both foster demand and support the supply side. There was across-the-board central excise duty reduction by 4 percentage points; additional Plan spending of Rs 20,000 crore; additional borrowing by state governments of Rs 30,000 crore for Plan expenditure; assistance to specific export industries in the form of interest subsidy on export finance, refund of excise duties/central sales tax, and other export incentives; and a 2% reduction in central service tax. The total fiscal burden of these packages amounted to 1.8% of GDP.

Besides, measures were taken to support industries in trouble, such as the automobile industry, through such measures as opening a new window for the purchase of buses by state entities under the Jawaharlal Nehru National Urban Renewal Mission and fast forwarding purchase of vehicles by the Ministry of Defence. The RBI supported these measures with a range of policy measures. The cash reserve ratio (CRR) was brought down from 9% to 5%, the statutory liquidity ratio (SLR) from 25% to 24%, the repo rate from 9% to 4.75% and the reverse repo rate from 6% to 3.25%.

The Singh government was also credited with a number of significant welfare measures. The Mahatma Gandhi National Rural Employment Guarantee Scheme, the right to food security and the right to information all took birth in this period. Aadhaar was another important development. He roped in Nandan Nilekani to develop a perfect identification system, which now forms the basis of the technological progress achieved in the delivery of services, banking, direct benefit transfer and many other areas.

Singh was a complete economist. His work in multiple areas in the past, his strong academic credentials, his openness to ideas, his holistic understanding of the economy, his concern for all sections of society, particularly the poor, and his ability to build consensus made him a leader who India will never forget.

The writer is also the author of As Good as My Word. Views are personal.