PV Narasimha Rao
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A profile
India Today, September 7, 2015
Kaveree Bamzai
Inside the complex mind of India's forgotten PM
Jairam Ramesh recounts the remarkable fashion in which P.V. Narasimha Rao ushered in far-reaching economic reforms despite a minority government and a lifetime of circumspection.
Jairam Ramesh was aide to P.V. Narasimha Rao as India confronted some ugly economic truths. In a new book, To The Brink and Back: India's 1991 Story, the sharp-witted, silver-maned, always controversial former minister recounts the 90 agonising days in which Rao engineered a two-step devaluation, changed export rules, accepted a conditional IMF loan, and liberalised India's industrial policy with a crack team comprising the man who was to become prime minister in 2004, then finance minister Manmohan Singh; principal secretary A.N. Verma; a hands-on commerce minister P. Chidambaram; and commerce secretary Montek Singh Ahluwalia.
Jairam recounts the remarkable fashion in which Rao ushered in far-reaching economic reforms despite a minority government and a lifetime of circumspection. As he puts it, "A man who famously remarked, 'Even not taking a decision is a decision', was remarkably decisive in the initial months. Jairam ascribes Rao's success to some "unique characteristics. Rao was crafty as well as bold; he did not have the image of being pro-business and pro-industry which meant if he was championing liberalisation, it implied it was of value to the nation; and because he had been in Parliament for over a decade, his voice commanded respect. Jairam reminds us of what an extraordinarily accomplished man Rao was-a polyglot fluent in Telugu, Marathi, Hindi, Sanskrit and Urdu; familiar with Arabic and Farsi; able to give interviews in Spanish; and capable of writing in French. He reminds us how Rao was computer-savvy (he was personally operating desktops in the late 1980s and was among the very first to start using laptops).
Equally, Rao was complicated, seemingly unable to break the spell of self-styled godman Chandraswami (Jairam suggests that Chandraswami was responsible for his sudden exit from the PMO because he was upset about the exclusion of his chosen aide, Pinaki Misra) and overcome a lifelong distrust of Rajiv Gandhi. Echoing the posthumous autobiography of former minister Arjun Singh, he also reminds us of Rao's complicity in the event that was to forever tear the communal fabric of the nation. But it is also true that when Rao and Manmohan Singh left office in May 1996, foreign exchange reserves were equal to five months of imports (against only three weeks when he assumed office) and there were three consecutive years of 7-plus per cent GDP growth. As Jairam puts it, "What had started out as a matter of compulsion soon became a matter of conviction. Nothing, he says, reflects this transformation than the attitude of Rao himself who increasingly started taking credit for the emergence of a new India. But it was an India where ancient enmities were also raising their ugly heads. These excerpts provide a peep into a thoroughly complex mind in a thoroughly complicated time.
1991: As the Prime Minister
Narasimha Rao was elected as the leader of the Congress Parliamentary Party (CPP) on 20 June 1991. On the evening of 20 June, (then cabinet secretary) Naresh Chandra met Narasimha Rao and handed over a top-secret eight-page note highlighting the urgent tasks awaiting the new prime minister. While the note had been prepared by different ministries, especially the finance ministry, it was the cabinet secretary who finally put it all together. When he saw the note, Narasimha Rao's first response was: 'Is the economic situation that bad?' To this, Naresh Chandra's reply was, 'No, sir, it is actually much worse.' He quickly briefed the incoming prime minister about what needed to be done and added that a default had to be avoided at all costs. He also informed Narasimha Rao about the efforts of the Chandra Shekhar government in seeking assistance from the IMF, adding that it would be better to do whatever had to be done immediately-rather than wait for IMF assistance, then respond, and give the impression of acting under international pressure. On the evening of 21 June 1991, the new prime minister-before informing me that he would be getting Ramu Damodaran, who had worked with him earlier, as his private secretary-said that I should join his office soon and basically focus on what had to be done immediately. He asked me not to wait for formal orders and instead, start working closely with his newly appointed finance minister, Manmohan Singh-someone I knew well since he had recruited me into the Planning Commission in August 1986. Indeed, when Manmohan Singh saw me at the prime minister's residence on the evening of 21 June, where he had come to give a detailed briefing, he smiled at me and said, 'Jairam, now is the time to do all the things you wanted us to do while in the Planning Commission.' My appointment as officer-on-special-duty in the Prime Minister's Office (PMO) was notified a day or two after the prime minister had, at the suggestion of P.C. Alexander, appointed as his principal secretary, A.N.Verma-another man I knew and enjoyed a warm personal relationship with. I could even share a joke in his company-on one occasion, suggesting that with him, Naresh Chandra and Suresh Mathur (then industry secretary), the 'Kayasth mafia' would rule. Verma only laughed and said, 'Badmaash ho tum! (You are a troublemaker!)'. This, then, is how I came to be where I was in that momentous period. The years of revival lay ahead. But June-July-August 1991 were early days of survival. The later impressive growth record of the Indian economy lent a certain amount of retrospective coherence to what got done in the initial weeks.
Rao and Manmohan
Manmohan Singh was officially given the finance portfolio on 22 June 1991. Three days later, he held his first formal press conference. It was a virtuoso performance where he laid out the government's priorities in economic policy in the clearest manner possible. On one issue though, what he said created a storm. The Congress' manifesto for the 1991 Lok Sabha elections had made a departure from the usual staid practice and ended up with a programme of action for the first hundred days (as also for the first 365, 730 and 1,000 days). P.V. Narasimha Rao was chairman of the manifesto drafting committee which included Pranab Mukherjee and Mani Shankar Aiyar. But it was P. Chidambaram who was the principal author of the idea. In the 'First 100 Days' section of the 1991 manifesto, the Congress pledged to, among other things, arrest price rise in essential commodities. At the 25 June press conference, the finance minister was asked about inflation. What he said first was unexceptionable: 'It would be wrong to say that I have a magic wand to bring down prices. What I can promise is that in three years time prices could be made stable if a strategy of macroeconomic management is pursued now.' But he went on to say that he had no readymade mechanism by which he could fulfil the Congress (I) poll promise of rolling back prices of a select group of commodities to their July 1990 levels. It appeared that the new government had started with a self-goal. The prime minister was perturbed and so was his political secretary, Jitendra Prasada. Prasada first sent for me. Next, the prime minister asked me to see him. I could sense that he was clearly irritated. He had received letters of protest from MPs like Rajni Ranjan Sahu and Gurudas Kamat. He expressed some frustration with economists not being sensitive to politics. He was worried that this could create a backlash against the government within the party. He was right. At a meeting of the CWC on 1 July 1991, the finance minister's admission on prices came under sharp attack-mostly by a senior leader from Uttar Pradesh, Ram Chandra Vikal. On 7 July, at a press conference in Hyderabad, in a bid to douse the flames, the prime minister said that the finance minister's statement was not a reflection of the government's decisions and that the government was bound by the 1991 manifesto-earning for Manmohan Singh the only public rebuke of sorts from his boss in their five-year partnership.
A number of my friends in the Congress called me and asked me to tell the finance minister to issue a statement saying that 'he was misquoted'. Knowing Manmohan Singh, I did nothing of that sort, but for months had to bear the wrath of senior Congressmen for canvassing the idea of a hundred-day agenda. I took this in my stride knowing full well that I was not its real author. Pranab Mukherjee, too, told me that 'people should realise that we seek a mandate for five years and not for a hundred days'. Since both he and Singh were key figures in the drafting of all subsequent manifestos, this fracas over the roll-back ensured that the Congress never included a specific and separate hundred-day agenda as part of its election promises in 1996, 1999, 2004, 2009 and 2014.
Rao and the Babri demolition
Rao's problems truly started with the Harshad Mehta scam that first came to light in April 1992, and thereafter, with the demolition of the Babri Masjid on 6 December 1992, an event that many of his own party colleagues believe-and, perhaps, rightly so-he helped orchestrate, or allowed to happen, or at the very least knew of as it unfolded, without intervening decisively. Almost the entire Congress believes that he wanted the masjid out of the way so that a permanent solution to the imbroglio at Ayodhya could be found. I had called him around 4 p.m. that fateful Sunday before leaving for Mumbai with Pranab Mukherjee, only to be told that prime minister 'andar hain' (is inside). Rao has offered an elaborate defence of himself in his book that came out two years after his death. That defence cannot be ignored. There were many circumstances that did preclude him from imposing President's Rule in Uttar Pradesh in October or November 1992. But there is no doubt that the responsibility for ensuring that 6 December 1992 never happened was his and his alone, even if there may be different views on his culpability with regard to what transpired that day. If Rao still remains compelling of our attention, even commendation, it is for the truly transformational leadership he demonstrated at a most precarious time in India's economic history. Of course, it could be argued that he had no choice and the alternative would have been to go down in history as the prime minister who presided over a default-but that would be tantamount to caviling. Moments sometimes produce men (and women). Narasimha Rao is an outstanding example of this.
Chandraswami's influence
Notwithstanding his many talents, it must be admitted that Narasimha Rao was a most puzzling man. He was a much-misunderstood man and he may well have done much to be so misunderstood. Rao was a complex personality, not at all easy to comprehend, and he made no effort whatsoever to make people want to understand him-except when he was on the backfoot. I was simply in no position to know what went wrong between him and his own party-a party he had served with distinction for almost half a century. I was an anguished witness to a most painful event on 24 January 1998, which showed how remarkably friendless Narasimha Rao had become within the Congress. The occasion was the release of the Congress' manifesto for the 1998 Lok Sabha elections. I was seated on the dais when, in response to a question, the Congress president, Sitaram Kesri, emphatically declared that his predecessor would not be put up as a candidate in the upcoming polls. It was a most jarring moment, and coming from someone who had been personally selected by Rao as a successor made it even more unpleasant. He was indisputably a loner, a man who didn't do much to cultivate and build relationships. To borrow a phrase from Michael White's biography of Isaac Newton, Narasimha Rao was above all 'a secretive man, a man coiled in upon himself'. Moreover, his relationships with the sleaziest of characters-Chandraswami being the most notable of them-which I saw at close quarters, were inexplicable and did no justice to a man of such erudition and learning. At one stage in the early days of his prime ministership, Chandraswami had convinced Narasimha Rao that India could easily tide over its immediate financial crisis because the godman's buddy, the Sultan of Brunei, had agreed to extend a line of credit to India at the most concessional terms. That the prime minister took this suggestion seriously is borne out by the fact that a plane was ready to fly the finance minister to meet the sultan. Thankfully, Manmohan Singh managed to convince his boss that this would be a foolhardy adventure.
A time for reforms
Swaminathans Anklesaria Aiyer
The Times of India, June 26, 2011
Unsung hero of the India story
Twenty years ago, Narasimha Rao became Prime Minister and initiated economic reforms that transformed India. The Congress party doesn’t want to remember him: it is based entirely on loyalty to the Gandhi family, and Rao was not a family member. But the nation should remember Rao as the man who changed India, and the world too.
In June 1991, India was seen globally as a bottomless pit for foreign aid. It had exhausted an IMF loan taken six months earlier and so was desperate. Nobody imagined that, 20 years later, India would be called an emerging superpower, backed by the US to join the UN Security Council, and poised to overtake China as the world’s fastest growing economy. For three decades after Independence, India followed inward looking socialist policies aiming at public sector dominance. The licence-permit raj mandated government clearance to produce, import or innovate. If you were productive enough to create something new or produce more from existing machinery, you faced imprisonment for the dreadful crime of exceeding licensed capacity.
Socialism reached its zenith in the garibi hatao phase of Indira Gandhi (1969-77), when several industries were nationalized and income tax went up to 97.75%. This produced neither fast growth nor social justice. GDP growth remained stuck at 3.5% per year, half the rate in Japan and the Asian tigers. India’s social indicators were dismal, often worse than in Africa. Poverty did not fall at all despite three decades of independence.
In the 1980s, creeping economic liberalization plus a governmentspending spree saw GDP growth rise to 5.5%. But the spending spree was based on unsustainable foreign borrowing, and ended in tears in 1991.
When Rao assumed office, the once-admired Soviet model was collapsing. Meanwhile, Deng had transformed China through market-oriented reforms. Rao opted for market reforms too. He was no free market ideologue like Ronald Reagan or Margaret Thatcher: he talked of the middle path. His model was Willy Brandt of Germany.
Contributions in Indian political system
His master stroke was to appoint Manmohan Singh as finance minister. Rao wanted a nonpolitical reformer at the centre of decision-making, who could be backed or dumped as required. He presented Singh as the spearhead of reform while he himself advocated a middle path. Yet, ultimately, it was his vision that Singh executed. In his first month in office, the rupee was devalued. There followed the virtual abolition of industrial licensing and MRTP clearance. At one stroke, the biggest hurdles to industrial expansion disappeared. Who was the industry minister who initiated these revolutionary reforms? Narasimha Rao himself! He held the industry portfolio too. Yet he did not want draw attention to himself. So he ingeniously made the delicensing announcement on the morning of the day Manmohan Singh was presenting his first Budget. The media clubbed the Budget and delicensing stories together as one composite reform story. In the public mind, Manmohan Singh was seen as the liberalizer, while Rao stayed in the background. Singh initiated the gradual reduction of import duties, income tax and corporate tax. Foreign investment was gradually liberalized. Imports of technology were freed. Yet the overall government approach was anything but radically reformist. When bank staff threatened to go on strike, Rao assured them that there would be no bank privatization or staff reforms. When farmers threatened to take to the streets, Rao assured them there would be no opening up of Indian agriculture.
The IMF and World Bank believed that when a country went bust, that was the best time for painful reforms like labour reforms. However, Rao took the very opposite line. He focused on reforms that would produce the least mass losers (such as industrial delicensing) and yet produced 7.5% growth in the mid-1990s. These gave reforms a good name, and ensured their continuance even when Opposition parties later came to power.
In the 2000s, the cumulative effect of gradual reform finally made India an 8.5% miracle growth economy. Rao got no glory for this. He had lost the 1996 election amidst charges of buying the support of JMM legislators. This led to his exit as Congress chief. Although he was eventually exonerated by the courts, he died a political nobody.
He deserves a high place in economic history for challenging the Bank-IMF approach on painful austerity, and focusing instead on a few key changes that produced fast growth with minimum pain. The World Bank itself later changed its policy and started targeting “binding constraints” (like industrial licensing)
Manmohan Singh said repeatedly that he could have achieved nothing without Rao’s backing. Today, 20 years after the start of India’s economic miracle, let us toast India’s most underrated Prime Minister —Narasimha Rao. The Swaminomics column of June 5 said incorrectly that Premier Auto had gone bust. In fact the company survived the collapse and shutdown of its auto production. It now has a modest presence in engineering, and is trying to reestablish auto production.
The JMM Bribery Case, July 1993
India Today, December 29, 2008
Gunjeet K. Sra
The democratic values of the country were put to shame when the then PM P.V. Narasimha Rao was accused of bribing members of Jharkhand Mukti Morcha to vote in his favour in the confidence motion.
