Till the eighties, terms like GDP and growth rate were for pink papers, deficit was a meaningless concept as the government could always print more money and job creation meant the government hiring more people. With low growth, high inflation and no job creation, we were inching towards a precipice. And crashed into it in 1990.
Though packaged as a correction of social inequality, the Mandal agitation was really a wake-up call announcing that government just did not have enough jobs and opportunities for the armies passing out of schools and colleges. Job creation had to be planned.
It was left to the two most colourless men running a minority government to change it all. Whether by circumstance or design, they plunged so completely into reforms that economy became everyone’s business. In hindsight this was their smartest move. They by-passed the political class entirely and made economy a topic of discussion on every dinner table. You had a great chance to that, by the way, but you blew it with a million different agendas.
They devalued the currency, disbanded the ‘licence raj’, brought down the list of sectors reserved for government from 21 to 3 and allowed private domestic and foreign investment into most sectors including infrastructure for which there was a dire need but no money. They and their successors nurtured the telecom sector such that it could lead India into the BPOs and knowledge revolutions in the future.
Duties were cut drastically giving us access to the best possible technology and products. Domestic companies were forced to shape-up or ship out. Foreign companies were free to enter the country, buy or otherwise set up manufacture. With easy possibility of setting up manufacture, the stipulation about transfer of technology by foreign companies became irrelevant. The changes were iconoclastic.
Suddenly we realised as citizens what it meant to be living in a sub-continent. From four or five now there were dozens of brands in each category. Forcing product, packaging and marketing innovation that would make sure that no one was left out of the loop.
The beauty of the reform process of the nineties is that all three parties ruled during the nineties and helped maintained the momentum. The biggest surprise was the dream budget of Deve Gowda and P Chidambaram in 1997 in which the duo reduced income and corporate taxes and abolished Dividend Tax? Am sure you remember the Sensex went up by 6.5% before the end of the Budget speech. And they were running a government nowhere close to majority.
In his time Vajpayee went out on a limb securing the telecom industry which had seriously miscalculated at the time of the auctions and allowed them to migrate to a revenue sharing model instead. A wise move that helped maintain momentum of growth. He also launched the golden quadrilateral project, pushed the river-linking project, disinvested in Maruti, VSNL, IPCL, BALCO etc. His was also a minority government.
This may interest you. The one immediate spin-off was in the creation of jobs. In the 6 year period from 1993-94 to 1999-2000, 1.88 cr jobs were created averaging to 2.5 lacs jobs a month. Compare that with a total of 1.35 lac jobs created in all of 2015, and 4.9 lacs in 2014. Other indicies were understandably slow to move up in a country as large as India. Growth rate went up modestly from 5.8% in ’93-’94 to 6.4% in ’99-‘00 and poverty rate dropped from 36% to 26%, good but not spectacular. However, the Sensex did go up almost three times in the same period.
Benefits of the reform process accrue on a hockey stick curve but with a lag. The nineties laid the foundation on which the country would grow at levels over 9% in the following decade. But the hockey-stick curve assumes momentum. Which in turn means continuation of the reform process. That is how China managed to keep growing well beyond 10%. We failed to do that. And the blame for that is largely yours. Virtually every effort of the UPA l government was blocked by you.
The natural corollary to production and infrastructure reforms would have been to focus on the distribution side and allow FDI in multi-brand retail which would have created more skill-sets, generated more employment, reduced prices, reduce tax evasion and built alternative distribution channels which could act as a self-correcting mechanism against hoarding. But you opposed it. And the country missed an opportunity. Sooner or later you will have to agree to it. It is too sensible an idea to not be pursued.
So what made the nineties click? There maybe many reasons but there is one.
The three governments did not allow themselves to be distracted into other priorities. Beginning with Rao, Deve Gowda and even Vajapyee who, in fact had to tackle tough internal and external challenges including Kargil, none of them wavered. They realised that reform is no part-time activity. It defines how you think and assumes a consistent, progressive global vision and an honest intent.
Reform needs consistent, single-minded focus by the entire government. It does not sit well with multiple, often conflicting objectives like kindling patriotism, rediscovering ancient wisdom and attempting social re-engineering. That is a severe self-created limitation you have created for yourself. The sooner you jettison your baggage, the better for you. And India.
How can you make the best of the situation today? Assume you are running a minority government which needs to get consensus on virtually every issue. Make phone calls, talk to the opposition, meet them, give and take ideas. In democracy it is not your majority that makes things happen but your keenness to carry people along.
If Rao, Gowda and Vajpayee could manage with minority governments, surely you can do so with a brute majority.
All you need to do is to remember Arjun and eye of the fish.