A panel discussion on 20 years of economic reforms, held here as part of the Business Standard Awards function on Friday, came round to the view that while the economic reforms unveiled in 1991 were triggered by a crisis, it was now time to focus not just on reforms, but on the many constraints that could choke the economy’s growth potential in the coming decade.
Complacency about achieving high growth without tackling problems arising out of rising energy prices, optimal allocation of natural resources and crony capitalism could jeopardise India’s long-term growth potential, panelists said.
The panelists were Union home minister P Chidambaram, the Prime Minister’s Economic Advisory Council chairman, C Rangarajan, Planning Commission Deputy Chairman Montek Singh Ahluwalia and the government’s former Chief Economic Advisor, Shankar Acharya. The 25-minute discussion ended just before Prime Minister Manmohan Singh, the architect of the 1991 reforms, arrived to give away the awards to top performers from the corporate world.
Turning point
Tracing the history of reforms, Chidambaram said if there were no economic crisis, Manmohan Singh would not have become the finance minister and there would have been no reforms. The Congress manifesto prepared for the general elections in 1991 did talk about an agenda of reforms, but with the assassination of Rajiv Gandhi, there was no certainty that these would have remained on the agenda. With P V Narasimha Rao as the prime minister and Manmohan Singh as the finance minister, such hopes were revived, Chidambaram said.
The panelists did not disagree with the suggestion that the reforms in 1991 were introduced by stealth, but Ahluwalia argued the crisis was so severe that it was a no-brainer to argue on the remedial steps the economy needed. Rangarajan, however, admitted the second phase of the depreciation of the Indian currency’s value vis-à-vis the dollar was effected in spite of the political establishment’s discomfort. Acharya said the doubtfulness on reforms was as evident in 1991 as it was now.
When asked if reforms had more backers now, Chidambaram said emphatically there were more reformers within the Cabinet, in the government, among Members of Parliament and even among opposition political parties. Financial sector reform bills drafted five years before were now being tabled in Parliament and seeing support in various quarters, he said.
Ahluwalia argued there was no reason why India could not grow as fast as the East Asian and Chinese economies, but becoming complacent about reaching these growth targets without tackling the constraints with more reforms was dangerous. Chidambaram said there was a case of crony capitalism in the manner in which business was getting land and mineral resources from the government. There was a lot of interface between the government and business on such issues, but, he said, India was nowhere near the kind of horror stories on crony capitalism heard in Russia.
Work ahead
Rangarajan drew attention to the disparities in growth in different regions and said there was need to pay attention to raising growth rates in all sectors of the economy.
Compared to 1991, Ahluwalia said business on Friday was more open to reforms, but the need was to focus on issues such as water management and urbanisation. Maharashtra, for instance, used 60 per cent of its water for three per cent of its land to grow sugarcane, and water still could not be priced, he noted.
All the panelists, however, were upbeat on India’s growth prospects in the coming decade. The need was to ensure India continued to maintain its current growth tempo for another two to three decades, like China had done for the past 30 years, they said.
The discussion brought together the core team that ushered in economic reforms and liberalisation in 1991. While Singh was the finance minister, Chidambaram was the commerce minister, Ahluwalia served in the finance ministry and Rangarajan was deputy governor in the Reserve Bank of India.
