Who really deserves credit for India’s economic growth?

Prime Minister P.V. Narasimha Rao | Source: Photodivision

Did the 1991 reforms constitute a revolutionary change in economic policymaking or were they simply a milestone within a longer evolutionary shift?

Adam B. Lerner

Academic debates rarely make headlines. But even 26 years on, the significance of the 1991 dismantling of the license-permit Raj remains Indian economic history’s most captivating subject–unrivaled so long as Jagdish Bhagwati and Amartya Sen refuse to put gloves on and jump in the ring.

Did the 1991 reforms constitute a revolutionary change in economic policy-making or were they simply a milestone within a longer evolutionary shift? Most importantly, who deserves the credit?

The stakes are high. Credit for pioneering the 1991 reforms has already helped Manmohan Singh, the milquetoast technocrat, become India’s unlikely prime minister for a decade. While bureaucrats and advisers are keen to cash in, business leaders love to wax rhapsodic about their fortitude in the pre-reform era and foresight in calling for the changes before they occurred.

Former Proctor and Gamble CEO Gurcharan Das has already demonstrated the possibilities of 1991 nostalgia as a cottage industry—his 2000 international best-seller India Unbound has led to numerous translations, a BBC documentary and undoubtedly hefty speaking fees.

This backdrop is precisely what makes India Transformed (Penguin Viking 2017), a new collection hailing the revolutionary nature of India’s 1991 reforms, so fascinating. Edited by Rakesh Mohan, Economic Adviser to the Ministry of Industry during the period, the book boasts an impressive list of contributors, including RIL’s Mukesh Ambani, former planning commission vice chairman Montek Singh Ahluwalia, Infosys-founder Narayana Murthy, and even former U.S. Deputy Secretary of State Strobe Talbott. All extol India’s 1991 reforms, inserting themselves into the narrative with varying levels of humility.

Mohan’s opening chapter, which combines memoir with policy analysis, largely credits three people with pioneering the 1991 reforms: Prime Minister P.V. Narasimha Rao provided the necessary political leadership, Finance Minister Manmohan Singh lent the project intellectual credibility, and Principal Secretary AN Verma—the enforcer—corralled the unruly bureaucracy into implementation. Despite the reforms’ imperfections, Mohan writes, they catalyzed the economic growth India has enjoyed in the decades since.

Mukesh Ambani, on the other hand, in his chapter credits his father, the legendary industrialist Dhirubhai Ambani, with calling for the license-permit Raj’s dismantlement well before it occurred. “He was at the forefront of this campaign for change,” writes Ambani, citing as evidence his father’s suggestion that the Observer Research Foundation organize a seminar on economic policy reform during the fateful month of July 1991.

Of course, Ambani is sure to add that his father did not need the reforms to thrive. A “born dreamer and natural doer,” the elder Ambani built Reliance into one of India’s most successful businesses beginning in the 1960s by deftly navigating the government’s bureaucracy. He called for them instead magnanimously—to “benefit India as a whole.” Infosys’ founder Murthy, likewise, recalls in exaggerated prose he and his partners’ doggedness in building Infosys before the reforms, traveling to Delhi 50 times in three years to seek licenses for disk drives.

The problem with these narratives is that they depend on a quasi-religious account of India’s 1991 rebirth that is simply too good to be true.

Economists Dani Rodrik and Arvind Subramaniam have pointed out in an influential paper that India’s economic growth rate actually began to surge around 1980, “with very little discernible change in trend after 1991.” They attribute this uptick to an “attitudinal shift,” which overtook the government during Indira Gandhi’s last years in office and Rajiv Gandhi’s five-year tenure and created a pro-business ethos that helped clean the rust off India’s economic gears. Thus, the 1991 reforms overhauled the sclerotic system and facilitated future growth, but should not be credited with sparking it entirely.

Outside of credit deserved by 1980s leaders that changed India’s intellectual climate, other research, citing recently-declassified documents, has pointed out that the International Monetary Fund and World Bank cajoled and coerced Indian policymakers into massive structural change they might have otherwise avoided.

As the cliché goes, “success has many fathers, but failure is an orphan.” Thus, the 1991 reforms’ politicisation is to be expected—at some point in recent decades, the Indian economy became massively successful and it has not looked back since.  This growth has not just made many contributors to India Transformed fabulously wealthy, but has also increased quality of life across the country tremendously. India has seen poverty reduction of 1.36 percent per year since 1991, more than three times the rate of years prior, leading to millions fewer going hungry and dying preventable deaths.

Perhaps we must then realize that India’s economic growth cannot be traced back to a single moment or a few individuals, but rather has had many shepherds. This reimagining might ruin the sensationalism of many of India Transformed’s chapters, but it would also provide material for a damn good second volume.

Adam B. Lerner, an editorial consultant at ThePrint, is a PhD candidate in Development Studies at St. John’s College, University of Cambridge. 

4 COMMENTS

  1. It’s a lie to say Manmohan Singh provided the Intellect for reforms. He was a socialist. All he did was babu’s job to implement what was told to him by PVN. MMS himself has admitted that it was Swamy who oversaw reforms during Chandrashekhar govt

  2. We have had so many Budgets, soon forgotten, only one that will be remembered, with its cadence from Victor Hugo : No power on earth can stop an idea whose time has come.

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