Editorial 1 : Manmohanomics, in his own words
Introduction: Dr. Manmohan Singh entered politics in 1991, and became the finance minister who shaped India’s transition from a centrally-planned, highly regulated, and largely closed economy to an open, liberalised, market economy. As Prime Minister between 2004 and 2014, he oversaw the phase of fastest economic growth and poverty reduction in the country.
Dr. Singh’s views on Planning vs Markets
- Dr. Singh was not a blind believer in the planning process, nor was he blind to the threat of corruption in government.
- But he did understand why policymakers before him chose a planned economic approach.
- Newly independent countries of the Third World lacked both a well-developed infrastructure of social overhead capital and an entrepreneurial class with a strong propensity to bear risk and uncertainty.
- In such environment, exclusive reliance on market forces and private enterprise could not lead to fast enough progress.
Views on Licence-permit Raj
- Dr. Singh argued for sharply scaling back overly restrictive regulations on private enterprise.
- According to him if growth of some of these industries is vital for sustaining the process of industrial development, a scheme of positive incentives should be devised to attract investments into these industries.
- Licensing is a poor substitute for positive promotional measures in such cases.
On Inequality ‘soak the rich’
- Dr. Singh was concerned about the danger of widening inequalities if India chose the path solely of market forces.
- Data show that while poverty rates have fallen since economic liberalisation, income and wealth inequalities have soared.
- But he also warned against governments adopting “soaking the rich” policies to address inequality.
- Policies of ‘soaking the rich’ have a strong electoral appeal and governments often fall prey to populist pressures and devise a regulatory framework with an eye on electoral appeal.
- This compels entrepreneurs to turn into speculators, short-term maximisers, making a living by manipulating political processes rather than through creative productive activity, and provides them a strong built-in incentive for evading taxes and siphoning off funds abroad.
On Openness of Trade
- Many economists now point out that the trade protectionism of the Nehru decades was a mistake.
- India’s weak export performance in the 1950s dismayed Singh as a DPhil candidate.
- In his thesis, India’s export trends and the prospects of self-sustained growth, published in 1962, Singh argued that policymakers had underestimated India’s export potential.
On PSU Autonomy, Unions
- Dr. Singh recognised that political interventions leading to inefficiencies in public sector undertakings, price controls, and the role of trade unions in sick and struggling firms were areas of concerns holding Indian back.
- According to him trade unions which insist on the persistence of obsolete technologies for the sake of job security of their members do not advance the cause of neither the public sector nor employment.
On Education, Health, Women
- Dr. Singh lay particular stress on the critical role of better education, health, and sanitation in boosting India’s productive capacity.
- He believed that an adequate and more equal access to basic public goods, especially education and health, can release vast latent human energies for creative, purposeful and socially satisfying work.
Conclusion: Dr Singh’s views did not exactly align with the ‘Nehruvian’ approach to economic policy. Long before he changed the Indian economy in the 1990s, he tried to mould policy in the direction of broad-based economic reforms and liberalisation. Very early on, he proposed ideas that are now part of India’s policy consensus.
Editorial 2 : The Unfinished Task
Introduction: Manmohan Singh’s reform legacy, mainly as Finance Minister in the Narasimha Rao-led government, was about liberalisation and globalisation.
Key Features of the 1991 Economic Reforms
- Liberalisation
- De-licencing of industries.
- Opening up sectors to private players.
- Dismantling price, exchange rate, and import controls.
- Globalisation
- Removing barriers to foreign investment (FDI and portfolio investments).
- Facilitating technology collaborations.
- Enabling access to domestic and international capital markets.
- Significant Measures
- Two-step devaluation of the Indian rupee.
- Announcement of the New Industrial Policy.
- Presentation of the 1991-92 Union Budget.
- These reforms shifted India’s economic framework from central planning, import substitution, and public sector monopolies to a more market-driven, private sector-friendly approach.
Missed Opportunities for Reforms 2.0
- While the 1991 reforms were revolutionary, subsequent governments, including Singh’s own tenure as Prime Minister (2004-2014), failed to implement the second generation of economic reforms.
- Privatisation: Limited progress, with only a few state-owned enterprises privatised (e.g., Air India, Maruti Udyog, Bharat Aluminium, Hindustan Zinc).
- Rationalising Government Spending: Increasing expenditure on subsidies and transfer schemes with short-term welfare benefits.
- Examples: Underpriced urea, free electricity, and irrigation water.
- It led to adverse consequences:
- Soil nutrient imbalance due to fertiliser under-pricing.
- Declining crop yield response.
- Depletion of aquifers.
- Missed opportunity to allocate funds to long-term welfare infrastructure like schools and hospitals.
Modi Government’s Groundwork for Reforms
- The current government has laid a foundation for future reforms through measures like:
- Identification of Beneficiaries: Linking welfare schemes to specific recipients.
- Aadhaar-Seeding of Bank Accounts: Enabling direct cash transfers to beneficiaries.
- This groundwork creates a conducive environment for eliminating market-distorting subsidies and replacing them with direct cash transfers.
Way Forward
- Relaunch reforms focusing on privatisation and reducing government interference in business.
- Transition from welfare subsidies to investments in sustainable development (education, healthcare, etc.).
- Implement direct cash transfers to reduce inefficiencies and ensure targeted welfare delivery.
Conclusion
The reforms initiated by Dr. Manmohan Singh were transformative. However, the unfinished agenda of Reforms 2.0 i.e. privatisation and rationalising subsidies, remains critical for India’s long-term economic growth. Future governments has the task in their hands to complete the reform process.