His tenure was a golden era to the nation
PV found the areas of development
No PM till now shown this much of courage
Sanjay Baru praises the former PM in his memorial lecture
Hyderabad, January 07: Today is a day on which everyone who participated in a program held at Hyderabad showered their memories with the late former prime minister Sri PV Narasimharao. The PV Global Foundation organised the PV Narasimharao memorial lecture. PV’s son Prabhakararao, Senior Journalist K.R. Murty, Retd CBI JD V.V. Laxminarayana and MAA Sarma spoke in this program. Former media advisor to the former prime minister Manmohan singh and senior journalist Sanjay Baru delivered the key lecture in memory of PV Narasimharao. He praised PV as the remarkable personality, who guided Indian Economy to flourish in his tenure. Between Indira Gandhi and Narendra Modi: The Transformative Political Economy of Prime Minister Narasimha Rao
Here is the full text of Baru’s speech.
I am grateful to Shri Prabhakar Rao garu and the PV Global Foundation for inviting me to deliver the P.V. Narasimha Rao Memorial Lecture, 2022. I feel honored by this invitation since PV remains without doubt the most remarkable Hyderabadi of the 20th Century. While he did not have the opportunity to leave his imprint on this city, he brought the city itself into global focus leaving his imprint on the country as a whole. As I had said over a decade ago in the Waheeduddin Khan Memorial Lecture, that I delivered at the Centre for Economic and Social Studies here, in medieval times Golconda and Hyderabad were global centres with trading links to the Far East and the Mediterranean. This city has once again become a global city with links to the rest of the world, thanks to a range of businesses and institutions that are now housed here. This ‘second globalisation’ of Hyderabad occurred after the 1990s due to the new opportunities opened up for local and regional enterprise by the policies that we associate with Prime Minister Rao. Of course we should give credit to several Chief Ministers including Shri Vengala Rao, Shri Chandrababu Naidu, Shri Y S Rajashekhara Reddy and Shri K Chandrashekhara Rao. However, their new worldview, that has contributed to the development of this metropolis, was crafted within a policy paradigm that we now associate with PV.
In my book, 1991: How Narasimha Rao Made History (Aleph Books, Delhi, 2016), I say:
“The initiatives that PV took within a year of assuming office have since defined the post-Nehruvian era in India. The policy shift on the economic front was the more obvious of the changes and the one that received the most academic attention. Less appreciated have been the shifts on the foreign policy front, both within Asia and around the world, and the inter-relationship between the two. Finally, there was the new turn on the political front with the era of single party dominance giving way to an era of coalitions.”
Many political scientists have written about this 'era of coalitions', as V.P. Singh famously dubbed it in the late 1980s. It lasted longer than what VP Singh presumed. From 1989 to 2014 India lived in this era of coalitions. While both Prime Ministers V.P. Singh and Chandrashekhar failed to manage their minority governments and so had short-lived tenures, it was PV who demonstrated the political skills necessary to not merely manage a coalition, which indeed the Congress Party was, but in fact utilised the opportunity provided by his unexpected tenure to undertake significant policy changes.
Some may argue that PV was not the head of a coalition in the manner in which his four successors were - Deve Gowda, Gujral, Atal Bihari Vajpayee and Manmohan Singh. This would be a simplistic way of understanding the nature of Congress Party politics. The Congress was always a coalition. PV was the first non-Nehru-Gandhi to be given the responsibility of managing this internal coalition. Indeed, even more than that, his was a minority government and so he had to also neutralise opposition political parties and win their support to be able to undertake far-reaching changes in Indian economic and foreign policy. So, it is safe to say that India lived in an era of coalitions between 1989 and 2014.
In my lecture today I will examine whether the 'era of coalitions' rather than the era of 'single party dominance', especially the authoritarian system of 'top-down' governance we witnessed during Indira Gandhi's tenure, and we now experience during Narendra Modi's, has produced better policies and better results or not. I shall submit for your consideration the idea that the 'era of coalitions' was in fact the 'golden era' for the economy and that there are good reasons rooted in the political economy of our democracy that explain this.
The most important factor is the manner in which PV combined his 'Post-Nehruvian New Economic Policy' with 'Nehruvian Consensus Politics'. While moving away from Nehru's 'Mixed Economy' model, he returned to Nehru's political 'Middle Path'. Both the economic policy initiative and its political management were dictated by necessity and circumstance, rather than matters of choice. In doing what was needed on the economic front, PV had no option but to take as many as he could along, rather than dictate policy from above. The latter option was simply not available to him, given the weakness of his political support base. I will return to some of these issues later.
Let us first consider the facts. It is now well known that the average annual rate of growth of the Indian economy from 1950 to 1980 was 3.5 per cent, while for the period 1980 to 2000 it was 5.5 per cent and from 2000-2015 it was over 7.5 per cent. Since 2015 there has been a deceleration in economic growth with the average for the period 2014-2023, excluding the Covid-19 year of negative growth, has been variously estimated to be closer to 6.0 per cent. In short, in simple terms of overall economic growth the best years for the economy were 2000-2015, during which period two explicit coalitions, one led by Prime Minister Vajpayee and another led by Prime Minister Manmohan Singh were in office. The decade during which the turn in economic performance occurred was, however, the 1990s. A further disaggregation of growth date throws up an even more interesting political economy result. Consider the decadal data.
Average Annual Real GDP Growth Rates
Nehru 1950-1965 4.1
Indira 1 1965-1980 3.2
Indira 2 1981-1990 5.4
PV-ABV 1991-2003 5.7
MMS 1 2003-2008 8.7
MMS 2 2008-2012 7.7
Modi 1 2012-2018 6.9
Modi 2 2019-2023 4.5*
- Estimated Some may point to the Nehru years, especially the decade of the 1950s, as contradicting our hypothesis that the economy performed better during the coalition era than during the era of single party dominance. On the contrary, the Nehru decade does not invalidate our hypothesis for two reasons. First, the Indian National Congress during Jawaharlal Nehru’s prime ministerial tenure functioned like a genuine coalition. Political scientist Rajni Kothari called it the ‘Congress System’, when the party was an umbrella under which many diverse interests found shelter. The Congress, wrote Kothari, was “a party of consensus”. In his obituary to Nehru, Kothari put it pithily, “Nehru’s greatest contribution to nation-building was not to have started a revolution but to have given rise to a consensus.” A second, and equally important, factor was that even with a towering personality like Nehru being Prime Minister, the Congress Party not only had equally tall leaders in the Union council of ministers but also state Chief Ministers of stature, consequence and political authority. As PM, Nehru had to manage both colleagues and CMs of no mean repute and political standing. Hence, the consensual system had to operate perforce because no one political leader could dominate all the institutions of the State. It is also useful to remember that the growth rate India logged in the 1950s, of over 4.0% per annum, signaled a significant achievement because in the half century before that, from 1890 to 1940, British India managed to record barely 1.0 per cent growth. In fact the till the foreign exchange crisis of 1958 and the China war of 1962 hit the economy, India recorded an even higher rate of growth of close to 5.0 per cent. The Indira Gandhi years can be divided into two parts; first, the period from mid-1960s till 1978 and second, the 1980s. By 1969 Indira Gandhi acquired dominance over her party and enjoyed unparalleled power till the end of the Emergency. These, however, were the worst years for the economy. The three wars of 1962, 1965 and 1971 imposed their own costs on the economy. The drought years of 1965-67 had further deleterious effects. One consequence of the decade of crises was the slowing down of economic growth. After recording an annual average rate of economic growth of 4.1 per cent in 1951–1965, growth slowed down in 1965–1980 to 3.2 per cent per annum. Most of this slowdown occurred during the second half of the 1960s and the 1970s – the Indira years. Indira Gandhi acquired her dominance over her party through a variety of means, including making the best use of an opportunity provided by the military dictatorship in Pakistan that enabled her to aid the liberation of Bangladesh. On the political front her decisive strategy was the turn to the Left. Undertaking nationalisation of a range of economic activity, increasing the ambit of bureaucratic socialism through a pervasive licence-permit-control Raj and imposing draconian controls during the Emergency, Prime Minister Indira Gandhi acquired enormous power and centralised it in the PMO. It was an era in which Chief Ministers were reduced to rubber stamps, as we ourselves saw in Hyderabad. The balance in Centre-State relations was shifted decisively in favour of the Centre and against the States. Junior staff in the PMO were issuing orders to Chief Ministers. What was the net impact of such centralisation of power, of increasing bureaucratic control over enterprise and the markets? The 1970s delivered the lowest rate of economic growth and the highest rates of inflation. Unemployment raised its head with major trade union action across the country. In fact the Railway workers strike of 1974 became one of the triggers for the imposition of the Emergency. The Economist magazine described Indira Gandhi as the Empress of India. Yet, this empress could not deliver development. The economic slogan of that decade that Indira Gandhi came to be identified with was ‘Garibi Hatao’ – drawing attention to the failure of three decades of post-Independence development in eliminating mass poverty. Having learnt lessons from this experience, a chastened Indira returned to power in 1980 and changed both her economic policies and, more importantly, her style of functioning. While the earlier imperial touch was seen when her government sought to oust NTR from office in 1983, she quickly retreated, allowed his reinstatement and even appointed the Justice Sarkaria Commission on Centre-State Relations. A more liberal and democratic style of functioning in the 1980s, by her and her son Rajiv Gandhi, had a positive impact on India’s political economy. Yet, despite having an unprecedented majority in Parliament, with over 400 MPs on the side of the treasury benches, Prime Minister Rajiv Gandhi was unable to take decisive steps to accelerate the pace of growth of the economy. Recall the fact that till 1980 India and China moved more or less at the same pace, even if China was always marginally ahead of India. In 1980 China’s GDP was roughly US$400 billion and India’s was close to US$300 billion. By 1990 China’s GDP was twice as big as India’s, exceeding a trillion Dollars while India’s was less than $500 billion. This was the decade in which China began to take off while India moved forward but fell short of ensuring a take-off. China’s economic reforms began in 1979 while India’s began in 1991. That 12 year gap made all the difference in securing for China a geo-economic advantage over India. Yet, it is relevant to note that the 1990s was a decade of change. The industrial policy liberalisation that Prime Minister Rao personally spear-headed, doubling up as the cabinet minister in-charge of industry, enabled a structural change in the manufacturing sector. From 1960 to 1990 – for three decades – there was hardly any change in the composition of the ownership of top 100 private sector companies. The same names kept appearing decade after decade. Tata, Birla, Modi, Goenka, Singhania, Thapar, Shriram, Godrej and so on. All of a sudden the 1990s witnessed the emergence of new business groups among the top 100. The Ambanis had already entered this league in the 1980s, but others who followed included Munjals, Mittals, Mahindra, TVS group, Premji, Infosys and so on. PV took care to ensure that even as his policies unleashed the so-called “animal spirits of enterprise” and encouraged entrepreneurship, they took care to balance this with support for the less privileged sections of society. This strategy came to be called ‘Reforms with a Human Face”. In his famous address to the Tirupathi session of the AICC, PV enunciated this strategy in these words:
“There is, however, one danger which we must guard against in the ‘opening up’ process. This could lead to wider disparities within society. To meet this situation, we have to enable the under-privileged sections to also derive the benefit of the new opportunities. This process would naturally need some time to fructify. Until that happens, there has to be a by-pass arrangement whereby benefits reach the lowest rungs of social pyramid directly from the State.”
His overall approach to policy, that successive Prime Ministers have sought to follow is again best stated in his own words:
“Influenced by the Great Buddha, Jawaharlal Nehru tried to mark a ‘middle way’ for us in all spheres. It was the same in Non-alignment in international relations, or in his concept of mixed economy with a ‘socialistic pattern of society’. …. To interpet Nehru’s Middle Way as being valid only in a bipolar situation is not to understand our ancient philosophy of the Middle Way, The Middle Way was meant to be a constant reminder that no assertion or its opposite can be the full and complete Truth. It meant that we looked for Truth in the interstices of dogmas, It means today that we will accept no dogma even if it happens to be the only dogma remaining in the field at a given moment. Our quest for Truth will still continue.”
In setting out these reference points PV defined a new political economy of growth. One that allowed domestic enterprise to grow, liberating it from the shackles of bureaucratic statism, even as the challenge of inequality was directly addressed. He made it a point to remind business journalists that he was not merely freeing private enterprise but also spending more funds on social welfare, funding an employment guarantee programme and a food subsidy scheme. When the managing director of the International Monetary Fund, Michel Camdessus, called on him the PM was categorical: "I will do whatever is required to promote growth and enterprise", he told Camdessus, "But nothing that we do should make even one worker become unemployed."
This was his version of 'reforms with a human face'. It is not surprising that during the period 1995-2015 India not only experienced the highest rates of economic growth but also witnessed a sharp rise in employment and a sharp fall in poverty.
This growth process also spread out regionally with new centres of manufacturing emerging in peninsular India and new business groups establishing themselves in these regions. For a century the growth process in the sub-continent was regionally confined to western and southern coastal regions. Thanks to the Green Revolution, the benefits of growth spread inland to agrarian regions in Punjab, Haryana, Andhra Pradesh, Tamil Nadu and Karnataka. By adopting a lighter touch in Centre-State relations, pursuing a path of genuine 'cooperative federalism', both PV and Vajpayee helped States spread the process of development to new regions. The Union government worked with State governments with different political parties in office. Federalism and federal institutions received a boost that made the growth process more inclusive.
In short, the new transformative political economy of Prime Minister Rao widened the base of economic growth and development. Not surprisingly, his successor, Prime Minister Vajpayee, walked the same path, the same 'Middle Way' as PV. Though Vajpayee came from an ideologically oriented party whose core was a divisive and majoritarian agenda, as PM Vajpayee chose to pursue an inclusive approach to social and economic issues. PV and Vajpayee were two sides of the same coin of consensual political leadership.
The 1990s was the decade when economic institutions began measuring the size of the 'Indian Middle Class'. India's big business that was till the 1970s focused only on metropolitican Indian market, began to discover emerging domestic markets for manufactured goods in new urban centres and semi-urban centres. The rural demand for manufactures, generated by the Green Revolution, sustained a new bout of manufacturing growth in the 1980s and the 1990s.
In the realm of foreign policy too, Prime Minister Rao took many significant initiatives, responding to the new global context arising out of the end of the Cold War and the emergence of the United States as the sole superpower. Each of the initiatives he took - the outreach to the US, his 'Look East Policy', the diplomatic recognition of Israel, the establishment of closer economic relations with the European Union and Japan, are all policies that all subsequent governments have pursued. In dealing with prickly issues like Kashmir, he reached out to Opposition political leadership.
It may be recalled that in 1994 he requested Atal Bihari Vajpayee to head an official Indian delegation to the UN Human Rights Conference in Geneva to defend India's record in Kashmir. The delegation included the then minister of state for external affairs Salman Khurshid, the Kashmir leader Farooq Abdullah and finance minister Manmohan Singh. Together, this multi-party official delegation ensured the India stood tall as it prevented Pakistan from embarrassing India on a global platform.
Each of these instances are examples of the inclusive style that PV followed and that his two successors, Vajpayee and Manmohan Singh, emulated. The ultimate recognition of the importance of this politics of consensus lay in the fact that as Prime Minister, Mr Vajpayee continued with the initiatives taken by PV. Both in the realm of economics and foreign policy.
Many neo-liberal economists have criticised PV for what they view as his 'half-hearted' liberalisation. Reacting to his enunciation of the concept of the 'Middle Path', at the AICC session in Tirupati, a senior cabinet minister said me in jest, "I hope the middle path does not end up as a muddle path.' Was it that PV was half-hearted in his pursuit of economic reform and liberalisation, or was it that he was politically cautious. I believe it is his cautious and consensual approach that in fact ensured that his initiatives have endured. Both he and his two successors had to battle both internal party opposition as well as opposition political parties. Rather than halt them in their tracks, the experience of dealing with such opposition made them reach out to critics and widen the constituency for change.
If PV adopted a consensual path because of the internal dynamics of the Congress Party, Vajpayee and Manmohan Singh adopted a similar approach because they were leading a coalition government and had to perforce take all their allies along with them. Of course, it is a fact that even they had to deal with political rivals and rival political centres within their own party. Many have often viewed this as a handicap. As a shortcoming. As a constraint. Rather, I argue, the political situation they found themselves in forced PV, Vajpayee and Manmohan Singh to think long term, build alliances, secure support from rivals and move forward in a manner that enabled their policy initiatives to outlast their respective tenures.
There is much wisdom in the saying, 'Act in Haste, Repent at Leisure.' We have seen how powerful Prime Ministers like Indira Gandhi and Narendra Modi have often acted in haste and have had to repent at leisure. Indira Gandhi's handling of Sikh militancy, Rajiv Gandhi's handling of Tamil Tigers in Sri Lanka and Modi's handling of farm sector reforms, and indeed even demonetisation, are examples of acting in haste and repenting at leisure. It is their political unassailability that makes them take decisions without due thought.
If PV and Vajpayee deployed their consensual style in undertaking far-reaching economic policy reforms that put India on to a new growth trajectory of 7.5 per cent average annual growth, Manmohan Singh used similar tactics to secure success for his most important foreign policy initiative, the US-India nuclear deal. In the end the opposition to his initiative was reduced to an essentially desperate political attempt to unseat his government. However, where Dr Singh succeeded was in carrying all sections of the policy establishment - the diplomats and the nuclear scientists - and his own party along with him.
Significant and fundamental shifts in policy have come both through top-down commands as well as through consensus-building. It is the consensually arrived at policies that have endured longer and have been more readily accepted by a wider cross section of society. The economic consequences of this consensual approach of policy making are before us. The 'Golden Years of Growth' - from the late-1990s to the mid-2010s - when investment increased, the share of manufacturing in national income increased, India's share of world trade increased, foreign exchange remittances and reserves increased, employment increased and poverty decreased - these Golden Years saw three Great Prime Ministers lead India - PV, Vajpayee and Manmohan Singh. They were at the helm of affairs during the period when the world began to view India as a 'Rising Power'.
India's rise was welcomed by a world that celebrated its pluralism, its liberalism, its multi-religious, multi-culturalism, its unity in diversity. India's rise was not welcomed merely as a counter to China's rise. India was not viewed as a pawn in any Great Game. Rather, as President George Bush explained to his wife Laura Bush on the ramparts of Kremlin in Moscow, 'here is a country that has a Sikh as its Prime Minister, a Muslim as its President, an Italian Christian as leader of the ruling coalition and is a Hindu-majority democracy that is an open society, rapidly integrating into the world economy.'
P.V. Narasimha Rao, Atal Bihari Vajpayee and Manmohan Singh strengthened these foundations of our nationhood and enabled the economy to rise and be empowered. It is India's pluralism, liberalism, secularism and democratic values that the world has come to value. But these are attributes that we must value ourselves, for our nationhood is built on these foundations. If we shake these foundations we destroy ourselves. The politics and economics of authoritarianism have weakened India before and will weaken India again. They diminished India in the past and will diminish them in future. It is inclusive politics of the kind that PV pursued through his "Middle Way' that we must rediscover today to secure our tomorrow.