No repeat of 1991?

It’s good to hear our economist Prime Minister Manmohan Singh assure a worried market that witnessed mayhem on Friday on all fronts that there won’t be a repeat of 1991. It’s worth recalling what had happened in that year and why Singh, then Finance Minister under Prime Minister PV Narasimha Rao, had been hailed as the doctor who saved the country from going bankrupt. With foreign exchange reserves lasting for a couple of weeks and the country enveloped in economic gloom, the Rao-Singh duo had taken a plunge that was unthinkable in socialist India 23 years ago: To open up the economy.

Notwithstanding the sovereign gold pledged to the Bank of England to bail out the economy and the country – and the resultant criticism from almost every quarter that flayed the move as selling India to our erstwhile colonial rulers by none other than the Nationalist Congress which had liberated the country from the British clutches – Manmohan Singh had steered the country through the most difficult economic period and made us proud of India’s success in growth and development. Old-timers can recall what the now Prime Minister said while delivering his budget speech on July 24, 1991, as Finance Minister ushering in his first dose of economic reforms that paved the way for future liberalization policies. Quoting Victor Hugo, he said, “No power on Earth can stop an idea whose time has come.” Arguably, it was the best of Dr Singh’s speeches that changed the course of Indian history.

As the Black Friday ended with market crash and rupee nosedive, the India Inc has started wondering whether we are heading to a repeat of 1991. But Dr Singh, while allaying such fears of a meltdown during the release of the fourth volume of RBI history titled “RBI History – Looking Back and Looking Ahead” in New Delhi on Saturday, said that there was no going back on globalization process and forex reserves could last six to seven months.

What he had in mind was that the present situation is not as dire as it was in 1991, thanks to more than a decade of healthy growth that propelled India into the league of emerging economic powers. But what Dr Singh had failed to mention was why we were sliding down faster than anybody’s expectations and what were the causes and remedies. Surely, he knows better than anybody else as he still carries the badge the Father of Indian Economic Reforms on his lapel. His only suggestion was to curb investments in unproductive assets and take a swipe at the outgoing RBI Governor Duvvuri Subba Rao on macro-economic policies and reining in the inflationary pressures.
However, the real reason lies somewhere else.

He blurted it out, rather unwittingly, while delivering his Independence Day speech on Thursday: As Finance Minister under the stewardship of PV Narasimha Rao, Dr Singh was provided with all the necessary instruments to operate on the ailing economy and save the country. In other words, Rao had given him a free hand which he doesn’t have now.

Nine years at the helm as Prime Minister, he has been conditioned to think and implement policies of what others in the party consider good for the economic wellbeing of the country. That’s the difference between UPA II and the PV-headed Congress government at that time. There may not be a repeat of 1991; if there is, the saviour may well become a sacrificial goat.