Many Indians have not been told who the architect of India’s economic reforms really was

A large number of those who were not adults in 1991 give credit to the wrong people.

At an interaction with students at a university near Delhi, in the winter of 2015, I asked the audience what the year 1991 meant to them. A young man replied without hesitation, and to laughter all around, “I was born that year!”

I suggested that something else may also have happened that year. Few hazarded a reply.

Earlier that year, addressing a meeting of the Hyderabad Management Association, I had asked my middle-aged audience the same question. Many were quick to reply. It was the year in which the government had introduced new economic policies that opened up the Indian economy.

So who was responsible for that, I asked my Hyderabad audience.

“Manmohan Singh!” said many, without hesitation.

True, Manmohan Singh was the finance minister who read out the famous budget speech on 24 July 1991 – one that contained several important policy initiatives and defined a new framework for India’s macroeconomic policy. He became the face of the new turn in India’s economic policies and played a key role as the voice of reform and liberalisation even in areas for which he was not directly responsible as minister of finance.

But what was the really historic thing that happened that day, I persisted, for which Manmohan Singh was not directly responsible? Some did murmur “decontrol” and “delicensing”. True, the new industrial policy was not part of Singh’s famous budget speech. In an initiative characteristic of Prime Minister PV Narasimha Rao’s low-key style, the historic dismantling of the infamous “licence-permit raj” (also called licence-permit-quota raj) had happened earlier that day when a “statement on industrial policy” was tabled in Parliament by the minister of state for industry.

It was the little known PJ Kurien, junior minister for industry (made famous more recently by his appearance on television chairing rambunctious sessions of the Rajya Sabha), who had the privilege of tabling the historic statement that liberated Indian industry from years of what amounted to ‘bureaucratic socialism’.

So, who was the senior cabinet minister for industry responsible for this major shift in India’s industrial policy? 

Complete silence. Then someone from the back of the auditorium once again said, “Manmohan Singh.” Wrong.

“Chidambaram!” said a few. “Kamal Nath,” ventured some others.

On that monsoon day in Hyderabad in 2015, no one could recall that a long-time inhabitant of that city, Pamulaparthi Venkata Narasimha Rao, PV as he was always known to the Telugus, was in fact the author of the most radical shift in India’s economic policy since Jawaharlal Nehru’s famous Industrial Policy Resolution of 1956. Nehru’s resolution had declared that India would strive to establish a “socialistic pattern of society”. In 1991 PV moved away from that pattern to unleash private enterprise.

It is significant, and relevant to our argument about PV’s centrality to the reform process, that as prime minister he not only retained the industries portfolio but also kept the Ministry of Civil Supplies and Public Distribution under his charge.

The now famous national rural employment guarantee programme (NREGA) had its initial launch during PV’s tenure as prime minister.

We cannot understand 1991 without understanding the role of the political leadership that made the policy changes of 1991 possible.

In that fateful year, India saw new political leaders emerge out of the shadows of the Delhi durbar, who set a different course for the country to follow. Equally responsible for political and economic change were global whirlwinds of various sorts…But without doubt, the central character was PV. The year made him. He made the year. For India, it was a turning point.

If most of us recognise the major landmarks of global or national history in our lifetime “it is not because all of us have experienced them, even been aware at the time that they were landmarks. It is because we accept the consensus that they are landmarks,” wrote historian Eric Hobsbawm. For some time now the consensus within public and academic discourse has been that the year 1991 marked a turning point in contemporary Indian history. It was a landmark year.

And yet, the commonplace view is that 1991 was eventful because of an economic crisis that forced India to take a new turn in its economic policies. But 1991 was about more than just that. It was also the year in which Rajiv Gandhi was assassinated and the Soviet Union imploded. In that dark hour, a diminutive, uncharismatic Congressman rose to the occasion.

PV was India’s first “accidental” prime minister, and a path-breaking one. He took charge of the national government and restored political stability; assumed leadership of the Congress, proving that there was hope beyond the Nehru-Gandhi dynasty; pushed through significant economic reforms; and steered India through the uncharted waters of the post-Cold War world.

PV not only ruled a full term but his policies ushered in a new era and gave new direction to national politics. He was an unlikely prime minister but a seminal one. Unlike the many short-lived prime ministers before him –Gulzarilal Nanda (May-June 1964, 11-24 January 1966), Morarji Desai (March 1977-July 1979), Charan Singh (July 1979-January 1980), Vishwanath Pratap Singh (December 1989-November 1990) and Chandra Shekhar (November 1990- June 1991) – PV was not even a Member of Parliament on the day he was named India’s twelfth prime minister.

By the summer of 1990 PV was preparing to go into retirement from public life and had packed his bags to move home to Hyderabad when circumstances catapulted him into the country’s top job. This happened in a year of multiple changes and challenges for the country. India and the world were in turmoil and grappling with change, the historical significance of which was not immediately understood by many.

The economic crisis of 1991 – an external payments, or a balance of payments crisis, to be precise – was in fact the consequence of a political impasse India found itself in.

A series of political and economic events of the 1980s came to a head around 1990-91. India was on the verge of defaulting on its external payments obligations, with foreign exchange reserves dwindling rapidly as oil prices went up, exports went down and non-resident Indians began withdrawing their deposits in foreign currency accounts in India.

While this situation can, in part, be attributed to unexpected and extraneous factors like the Gulf War of 1990-91, one important reason for the precipitous fall in foreign exchange reserves was a loss of confidence in the Indian government’s ability to deal with a difficult economic situation. That difficulty was almost entirely on account of the political brinkmanship and populism of a variety of political actors. In the end, it was politics that trumped economics.

The economic crisis of 1991 was as much a consequence of bad economic management of the preceding half decade during the tenures of Rajiv Gandhi (1984-1989) and VP Singh, as it was of the political choices they made. That is, the responsibility for the events that combined to push India to the brink of default must lie with Rajiv Gandhi and VP Singh. It was then left to Chandra Shekhar and Narasimha Rao to arrest the slide and clean up the mess. And the credit for understanding the seriousness of the situation and acting in time must go to the two of them.

Excerpted with permission from 1991: How PV Narasimha Rao Made History, Sanjay Baru, Aleph Book Company.

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This article was produced by the Scroll marketing team on behalf of Hindustan Unilever and not by the Scroll editorial team.