Son : ‘Appa, when can I get married?’
Dad : ‘Let me think about it, and get back to you after few years’
That was an oft-repeated joke (!?) about PV Narasimha Rao during my high-school days. So why was this a ‘joke’? Well, the guy who brought up the topic of marriage is Rao’s son, already in his 50s, and with little hopes of getting married. And Rao, the procrastinator had managed to evade yet another personal crisis, by deferring the decision. Growing up in the 1990s, this was my first impression of Narasimha Rao – unimaginative, indecisive, uncharismatic PM of India.
In 1991, India was a nation on the cusp of a major breakdown. On the political front, the previous two Governments led by VP Singh and Chandrasekhar had lasted only a year each. Insurgent movements in Punjab, Assam and Kashmir threatened to blow up the nation. In May-1991, the country’s former Prime Minister Rajiv Gandhi was assassinated by a LTTE suicide bomber. On the economic front, India was faced with multiple problems. In June-1991, India’s foreign reserves were barely adequate to pay for more than 2 weeks of imports. The Gulf War had added to India’s economic woes. Oil (that India imported) price had trebled. Indians living abroad sent lesser remittances, but had withdrawn 900 million dollars’ worth of deposits from Indian banks, thereby further dwindling India’s reserves. And India’s short-term loans were already due for repayment, thanks to reckless borrowing during Rajiv Gandhi’s period. Decades of Indian-style socialism and populist policies had paralyzed the economy. Return on investment was meager, industrial growth was poor, inflation was high, and exports were low. In short, India’s credibility was rock bottom.
On the international front, things were changing too. The end of the Cold War and collapse of Soviet Union in 1991 had brought in a new world order. China, long seen as an inward-looking country had started to become more open and dynamic. East Asian countries were on the rise, while the West of Asia was torn in conflict.
It was under such tumultuous circumstances that PV Narasimha Rao came into power in 1991. In his first few months, Rao’s Government made several tough decisions, unprecedented in the history of independent India. First, it had to execute a painful decision made by the previous Chandrasekhar government – to mortgage gold reserves to avoid default of its outstanding IMF loan. Second, it had to make another courageous decision to devalue the rupee by around 18%. The opposition was up in arms, and even some Congressmen themselves were uneasy.
But Rao was a man on a roll. With the rupee now closer to its true value after depreciation, Rao and his Finance Minister Manmohan Singh decided to abolish export subsidies – a sop that was originally given to exporters to compensate for all the inefficiencies of the Indian system that made exports globally non-competitive. The abolition of subsidies sent exporters panicking. To placate them, the Government announced a mechanism by which exporters could earn exim scrips and trade them to pay for imports. Within 2 weeks of assuming power, a minority Government, led by someone outside the Nehru-Gandhi family had taken some momentous decisions. This also set the stage for Manmohan Singh’s landmark July-1991 budget that reduced fiscal deficit, disbanded the license-permit system, opened the Indian economy to private players and made several reforms that brought the economy back on track.
Vinay Sitapati, in his book Half Lion: How PV Narasimha Rao transformed India takes us through an intriguing story that weaves economics and politics, and comes up with a blockbuster. The book gives us a closer look in to the workings of Rao’s mind, his political career, personal life, events that shaped his ideology etc. The book has been translated into Tamil by my friend J.Ramki.
So what were Rao’s failures ? Rao was Home Minister when Indira Gandhi was assassinated in 1984. Indira’s assassination was followed by anti-Sikh riots in Delhi, where the police directly reported to the Home Minister. But Rao, perhaps wilting under pressure from Rajiv Gandhi, decided to act indifferent to the situation. He allowed himself to be a mute witness to the riots, and let the Prime Minister’s office call the shots. Later in 1992 during the Babri Masjid demolition, Rao’s failure to act decisively is said to have cost the nation dearly, and change the narrative of Indian politics. But Sitapati vehemently argues in defense of Narasimha Rao in the Babri Masjid episode. One may agree or disagree with his views, but this is undoubtedly one of the most fascinating chapters in the book. Rao was also allegedly involved in several other corruption scandals – Harshad Mehta scam, Lakhubhai Pathak case etc.
Being a non-Nehru-Gandhi leader in the Congress is no mean task (Ask Manmohan Singh). Therefore it is hardly surprising that Rao was constantly at crossroads with Congressmen who owed their very existence to the Gandhi family. Rao was challenged by Arjun Singh, Natwar Singh, Sharad Pawar and their coterie who were constantly bickering about him to Sonia Gandhi, and trying to undermine Rao’s position. But Rao the shrewd politician alternated between playing fox, lion and mouse as the situation demanded. Sitapati argues that Rao tried to keep Sonia Gandhi in good humor – updating her on key policy issues, paying obeisance to her slain husband, and often extending courtesy.
But why, and how did Rao fall out of favour with the Gandhi family? What were the forces that worked against him? It is the absence of such critical assessments that appear to be seriously lacking in Jairam Ramesh’s book To the Brink and Back: India’s 1991 Story. Jairam Ramesh (Congress MP in 2004) was then on a special assignment in the Prime Minister’s Office during the first few months of the Rao Government. He is credited to have drafted several policy speeches to the PMO, and privy to discussions and events that unfolded inside power circles. To be fair, his book provides some insights into the decisions and dilemma in 1991.
Although India has a long way to become a developed nation, it has made giant strides in the last 25 years. Once admonished for its “Hindu rate of growth” – cliché for low rate of economic growth – post-reforms, India remained the second fastest growing economy in the world, behind China until 2015. From a position of scarcity in 1991, India’s foreign reserves have grown from $5.8 billion in 1991 to $361B in 2016.
But the biggest impact story in the last 25 years has been the contribution of India’s private sector. From being a country where it took 3 years to get a fixed line phone connection, India has mobile penetration in almost every corner of the country. India’s progress in telecom, information technology, entertainment and other fields have all been due to opening up of the private economy. I find it laughable when many Indians, working in plush air-conditioned offices and drawing 6-digit salaries, post messages on Facebook using their iPhone (both products of free market economy), and talk about how industries have ruined India. I hope that they spend some time reading about Narasimha Rao or the reforms of 1991.
How does one evaluate Rao’s performance as PM ? Sanjaya Baru in his book 1991: How P. V. Narasimha Rao Made History thinks that one should compare the state of affairs of the nation that the person inherits the day he takes charge with the day one demits office. By that yardstick, Nehru was a great PM at the end of his first decade in office, but his image had dented in his last 5 years, particularly after the war with China in 1962. Indira Gandhi stormed into office after liberating Bangladesh in 1971, but her management of economy was patchy. Her populist positioning did nothing to improve the economy. Rajiv Gandhi, albeit with a massive mandate, squandered it with poor political will and courage to push major reforms. Sanjaya Baru’s book has a separate chapter that talks about attempts made during the Chandrasekhar regime (an eye-opener for me).
So what if Rao had not become PM in 1991? Hard to answer that question. Perhaps the answer lies in Manmohan Singh’s famous line in the 1991 budget speech when he quoted ‘No power on earth can stop an idea whose time has come’. Rao’s time as PM had come, and he steered the country through a period of political uncertainty, economic crisis and shift in global balance of power.
For a man who was credited with such reforms, Rao continues to be a pariah within his own party. When Rao died in 2004, his party denied him a burial in New Delhi. His party office refused to open its gates during Rao’s funeral. Instead, the party cast him as a usurper to the Nehru-Gandhi throne, and virtually castigated him as a conspirator in the destruction of the Babri Masjid in 1992.
Alas, Rao continues to be the tragic hero !
Links to the books :