Montek Singh Ahluwalia on Manmohan Singh: A wise, gentle and persuasive leader who made a huge difference

It is not easy to compress in an oped all that I would like to say about him, but much that needs to be said has already been said in the press coverage of the last two days. The reforms of 1991, which he introduced as finance minister in the P.V. Narasimha Rao government, are undoubtedly the most important part of his legacy.

They brought about a decisive change in India’s economic policies and performance, and it is now widely recognized that this change of direction set the stage for India’s emergence as one of the world’s fastest-growing emerging economies.

While economists and businessmen know that the reforms were truly transformational, I do worry that two-thirds of our population was born after 1991 and even the young adults among them have only a vague idea of the damaging policies they replaced.

As the world re-arranges its views on protectionism and greater government intervention gains popularity around the world, there is a real danger of some of the earlier discredited policies creeping back.

Also read: Sardar of reforms: Manmohan Singh’s legacy shapes India’s future

One reason why this may happen is that the reforms were not made into a politically compelling narrative. While the Rao government backed the reforms, it did not speak loudly enough about the reforms or make them into a winning political slogan.

Prime minister Narasimha Rao once said to me: “The trouble with you fellows is that you haven’t come up with a good word in Hindi for economic liberalization." He was right. ‘Aarthik sudhaar’ had none of the connotation of ‘freedom’ that should be associated with liberalization.

Someone suggested ‘chhoot’ as an alternative, but this conjured up images of ‘loss of control’ rather than liberty. As a result, the younger generation today does not really understand the importance of freedom from controls as an essential element of the ease of doing business, especially for smaller and new firms.

A common criticism in the earlier stages of the reforms was that we were moving too slowly.

Dr. Singh was not an advocate of the sort of ‘big bang’ reforms that were championed by US academics for Russia and East Europe. The Deng Tsiao Peng formula of gradualism—“crossing the river while feeling the stones"—was more appropriate for India, and that was the course we adopted.

However, while gradualism should permit the stretching of a time-table to make change more palatable, it should be accompanied by a clear vision of what the destination will be, with steady steps towards it.

This is precisely what Dr. Singh achieved as finance minister. He set up external expert committees on tax reforms (chaired by Raja Chelliah) and banking sector reforms (chaired by M. Narasimham). Both panels included outside experts and former government officials and made recommendations on the changes needed.

The reports were published to elicit public comments. Subjecting proposals to public debate increases transparency in decision-making and helps stimulate public discussion. It may seem onerous for those in government, but it helps generate a true ‘buy in’ for a change in policy direction.

This approach was not followed by all ministries. The process of liberalization in industrial licensing and import licensing of consumer goods was fitful, with no clear time-table.

For example, import restrictions on consumer goods were removed only in 2003 and reservation for small-scale industries was phased out far too slowly, a mistake in my view, since these were the areas where we had a comparative advantage in exports.

In my book Backstage, I have said this is not “gradualism" but “opportunistic liberalisation." It amounts to giving a policy signal in terms of direction, but making changes only when an appropriate opportunity arises. This is clearly sub-optimal.

The process of rationalizing GST that has been ongoing for some time provides a good example. Finance ministry spokespersons have repeatedly stated that the number of GST rates will be reduced to two, with a third higher rate for luxury goods.

Would it not be a good idea to produce a paper making specific proposals and use public discussion to build opinion in favour of the change? It may become necessary to modify the proposals based on feedback received, but some progress would be better than none.

Also read: P. Chidambaram on Manmohan Singh: One journey ends, another continues

Similar issues arise with respect to income tax and customs duty reforms. It has been stated that these issues have been referred to an internal committee.

It would have been much better if they had been referred to external expert committees, which could include former income tax and customs officials. As it is, we have to wait until the budget to see what comes out of this internal exercise.

The trouble is, once the ministry has put something in the budget after full consideration, it becomes very resistant to change it in the light of ex-post criticism.

The need for greater clarity on how we move forward is especially important today as we try to achieve the objective of Viksit Bharat. There is no doubt that India’s economy is doing well, at a time when most countries are performing poorly because of the difficult global situation.

However, our growth rate at present is somewhere between 6.5% and 7%, whereas Viksit Bharat needs 8% and possibly more. And, we must maintain this over the next 25 years!

We did grow at over 8% for four years from 2005 to 2008, and we may be able to achieve that again, but to do so over a 25-year stretch will be difficult. It will certainly not happen if we continue on a business-as-usual path.

The challenges before us are well known. We need a revival of private investment, for which we need to identify concrete measures. And these measures must be implemented on a well-defined time-table. We need much better export performance in goods.

Much store was put in concluding free trade agreements, but they have yet to fructify. More recently, government spokesmen have suggested that we need to reconsider joining the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

This would be a major signal and should be done quickly. The agenda for the future must also include initiatives in health and education. These need to be spelt out. And we need initiatives to combat climate change. In all these areas, careful design of the plan of action is essential and that requires advance consultation.

Dr. Singh’s personality explains a great deal of his success and we can learn from it for the future. He was internationally acclaimed as an ‘econocrat’ par excellence, and this reflected the combined effect of his technical skill as an economist and his experience as a civil servant and politician.

Yet, he never used his standing to assert pre-eminence . He was always willing to engage with those who disagreed with him, encouraging them to express their views, relying on persuasion rather than bluster to bring them around.

Also read: Manmohan Singh, the leader who liberalized India

I saw this first-hand in G20 summit meetings in the wake of the 2008 financial crisis. He was one of the most respected voices in the room. This is what led president Barack Obama to state: “ When the Prime Minister speaks, the world listens."

Finally, I must mention his firm belief that in a country of India’s immense size and staggering diversity, differences are bound to arise and they needed to addressed sensitively.

He had a deep conviction that sincere efforts to understand the constraints that make others take a different view would help find a way of overcoming differences.

On one occasion, in an internal meeting of the Planning Commission, someone said the problem was that policies laid out in the Plan were not implemented on the ground. Dr. Singh responded: “We must remember that in India, planning must be seen as the art of persuasion." I believe he felt much the same about politics.

Funerals are supposed to bring closure and the official funeral did just that for me, bringing closure to a long relationship. Manmohan Singh is no longer with us, and that is a great loss to those of us who were close to him personally.

But I hope India will preserve his legacy of deliberative, transparent, yet decisive and clear-headed policymaking. Keeping that legacy alive would be the finest tribute to this great son of India.

The author is former deputy chairman, Planning Commission, and currently distinguished fellow at the Centre for Social and Economic Progress.