On July 24, 1991, Finance Minister Manmohan Singh went to Parliament to present the budget Photo Credit: Hindu Archives
Less than a month after he took office as India’s 22nd Finance Minister, Manmohan Singh presented a Union Budget in July 1991, which changed the country’s economic course with some drastic decisions that were badly needed. This budget was prepared in the midst of a severe and deep crisis unprecedented in the history of independent India.
It is rare for a finance minister of any regime to make even subtle criticisms of his party’s predecessors in office, especially if the party swears by the indelible imprint of those leaders. Manmohan Singh, arguably India’s most educated leader, was not weighed down by such expectations.
In his landmark speech in Parliament on July 24, 1991, Dr. Singh explained in painstaking detail the need for India to embrace a new era of industrial licensing and economic liberalization, paving the way for everything from cars to shoes to burgers and the stock market. Business accounts that Indians now accept, but do not hesitate to call out the mistakes of the past.
Editorial dated July 25, 1991: Protecting the poor
Noting that the efforts of former Prime Ministers Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi gave India a ‘well-diversified industrial structure’, Dr. Singh does not hesitate to firmly link the origins of the crisis to policies. In the past, entry barriers for firms, including the expansion of licensing and the growth of monopolies hurt consumer interests.
It is well known that Dr Singh opened the door to foreign investment in a myriad of sectors as finance minister and later as prime minister, pushing back the Left coalition’s resistance on issues such as easing FDI limits in telecom and insurance. Following the landmark Indo-US nuclear cooperation agreement.
However, few will remember that his first budget also laid the foundation for India’s modern stock market boom as he announced the creation of the Securities Exchange Board of India (SEBI) to protect investors’ interests. Or as he spoke passionately against protectionism and batted for consumer interests as well as wealth creators, he strongly objected to “thoughtless and heartless” conspicuous consumerism—issues that still resonate today.
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It speaks volumes for his intelligence that he could take harsh criticism with a dose of humor or literary references. So when the Left attacked him for drafting the budget policy at the behest of the World Bank, he joked that the World Bank’s interests were really at work – explaining it as West Bengal instead. For example, he even quoted Victor Hugo, or Percy Shelley’s ‘Ode to the West Wind’ in response to controversial questions from journalists.
He even peppered his famous budget speech with the gem that he was ‘very unhappy’ since his wife was appointed FM. “The House will agree that it is not good for the health of our economy if the finance minister makes the relationship with his own finance minister strained at home,” joked Dr Singh while announcing tax exemption on household items, especially tiffin boxes.
In his 2007 autobiography The Age of Turbulence: Adventure in a New World‘, former US Federal Reserve Chairman Alan Greenspan credited Dr Singh in 1991 with tearing a modest hole in India’s regimented economy and demonstrating that little economic freedom and competition could produce extraordinary gains in economic growth.
That task, as any economist would privately admit, remains unfinished, and those themes resonate today, even if not as loudly. Dr. Singh’s exit leaves a vacuum in the public policy debate, the absence of which could make it difficult for India to tear the holes he has managed to tear in what Mr. Greenspan calls India’s fabric of Fabian socialism.
published – December 27, 2024 at 01:07 pm IST