Picking a Policy

Montek Singh Ahluwalia’s book, Backstage, is (in his words):

“A travelogue of India’s journey of economic reforms, in which I had the privilege of being an insider for 30 long years.”

At college, he loved to debate. In real life:

“I realized the art of persuasion is very different from the art of debating, and much more challenging.”

 

It is easy to criticize Soviet style central planning. But only with hindsight, says

Ahluwalia. In Nehru’s time, central planning seemed to be working – it had transformed the USSR from a “feudal society into an industrial power within a few decades”. In fact, in the 1960’s, several top American economists felt that it was entirely possible that the Soviet planning could make their national income higher than America’s by the end of the century!

 

Ahluwalia’s stint at the World Bank (WB) “would give me first-hand experience of development problems in a range of developing countries”. WB aid to countries came with terms and conditions around various economic policies. And America, as the largest contributor to the WB, had a large say on what those policies were. In one case, this led to a situation where US/WB insisted India devalue its currency for a 5 year aid package. Devaluation is politically problematic, but Indira Gandhi in 1966 went ahead and devalued the rupee by a massive 36%, but then the promised aid never came. Possibly because the new US President was pissed off with India’s stance on the Vietnam war, possibly because India was in the Soviet camp. Whatever the reason, that experience left a bitter taste in Indira and most Indian politician’s mouths – they would mistrust the West and remember the betrayal for decades to come…

 

When it comes to the Green Revolution, Ahluwalia says the political part of the credit goes to Indira Gandhi. The agriculture minister and such institutes wanted to import high yielding Mexican wheat seeds and use that to develop hybrid seeds for Indian conditions. The Finance Ministry opposed the idea because India didn’t have much foreign exchange back then, and was such a gamble really a good use of precious forex? The Left opposed it because the Mexican seeds had been developed by the Americans! Indira went ahead anyway as she felt food security was critical and the rest, as they say, is history.

 

Yet more reminders of Indira Gandhi being a decisive leader – the two instances above, the Bangladesh war, the Emergency, sending the army into the Golden Temple… As with any decisive person, she made her share of mistakes but also had her share of successes.