To the Brink and Back: India’s 1991 Story (14 page)

I knew my goose was cooked and I would definitely be held responsible for the leak. I immediately ran upstairs, carrying the newspaper with me, and barged into
Verma’s room as soon as he arrived (which was around 9.15 a.m.). I displayed the paper and told him that I was not responsible and there had never been any contact between me and the journalist whose byline had appeared. I went to the extent of telling the principal secretary that he should immediately order an IB (Intelligence Bureau) probe which would vindicate me completely. Verma heard me out for a couple of minutes, smiled as he always did, and simply said: ‘
Relax, yaar. Khamakhan pareshaan ho rahe ho. Ja ke apna kaam karo
. (Relax. You’re fretting for no reason! Get back to work.)’ I was flummoxed by the nonchalance with which my remonstrance had been dismissed, but decided to let the matter go. Perhaps, there is some truth in the adage that ‘often the ship of state leaks from the very top’!

Initially, we had planned to release the
industrial policy reforms separately. Indeed, all public statements made by the prime minister first on 9 July and then again on 15 July in the Lok Sabha suggested this. Then, there was a view that the reforms should form part of the budget that was to be presented on 24 July. That was certainly the finance minister’s view. I found myself encountering, perhaps, my only disagreement with him in that period when we worked together. I argued that the industrial policy reforms were truly revolutionary and to have maximum impact they had to be announced separately. The prime minister seemed to agree with my contention and asked me to prepare a speech for his use, if and when he presented the industrial reforms package in Parliament. I prepared a speech and sent it to him. But, as it turned out, the speech was never used since the prime minister decided not to speak.
Alok Prasad, then the
prime minister’s private secretary, returned the draft to me pencilling along the margin ‘pity this was never used’.

The prime minister won the vote of confidence in the Lok Sabha on 15 July. After his widely-appreciated reply on the same day, the prime minister instructed us to get the cabinet note on industrial policy reforms ready. The Ministry of Industry prepared the note and the cabinet was to meet on 19 July to consider and approve it.

By now, I was beginning to get nervous about whether we would ever be able to get the industrial policy reforms through. I was not the only one to have doubts. On 6 July,
The Hindu
carried a headline, ‘New radical industrial policy coming’. But on 19 July, the headline read, ‘New industrial policy may not be radical’! This newspaper generally had its hand on the pulse of the government at the highest levels—so one certainly had cause for worry!

Expectedly, there were fireworks in the cabinet on 19 July. Many ministers objected both to the substance and style of the note on industrial policy reforms. Some felt that we were abandoning Congress’ ideology while some others felt that a strong case had not been made for these far-reaching changes. The predominant view was that the cabinet note appeared too damning of the past.

That very evening, A.N. Verma called me to his residence and told me what had happened. He said that the prime minister had set up a
Group of Ministers (GoM) to look at the proposals once again and that he wanted me to reshape and recast the cabinet note in a suitable manner. I asked
A.N. Verma what ‘a suitable manner’ meant, to which his reply was ‘
tum jaano
(you’d know)’. When leaving, Verma told me that the prime minister wanted me to attend the GoM meeting the next day and answer any question that may be raised. After listening to the deliberations of the GoM, I was to redo the cabinet note and send it to Verma and the prime minister immediately—which meant on the evening of 20 July.

The GoM met the next day.
Madhavsinh Solanki
⁵⁷
was worried that the industrial policy reforms would hit the development of backward areas and said that tight controls had to be retained on industrial location policies.
Arjun Singh
⁴⁵
and
M.L. Fotedar
⁵⁹
were apprehensive that we had gone too far in relaxing MRTP controls.
B. Shankaranand
⁶⁰
was unhappy with the provisions for opening ourselves to foreign investment, that too in such an obvious manner.
Balram Jakhar
⁶¹
and
Rajesh Pilot
⁶²
too felt that we were diluting the party’s public sector ideology significantly. But the commerce minister,
P. Chidambaram, defended the reforms proposals unequivocally, addressing every single concern raised in his own inimitable style. I mostly listened, intervening only once or twice to clarify some doubts raised by the ministers.

As the meeting ended,
Manmohan Singh smiled at me on the way out and said, ‘Now it is up to you, Jairam.’ I was confused and completely at a loss about what needed to be done. Were we going to abandon industrial policy reforms or were we to go ahead? The prime minister himself had not said anything, and A.N. Verma wasn’t sure what the prime minister expected of me. Besides, I had barely been given any time.

I tried to make sense of the
GoM meeting. It appeared that the political packaging of our reforms proposal was not right. It also appeared that the cabinet note, considered by the cabinet on 19 July, lacked historical context. I spoke to the finance and commerce ministers, and they orally gave me some formulations to mull over. I took about two hours to think them through and draft a longish preamble to the cabinet note. I showed it to A.N. Verma and he liked what he read. He dispatched it to the prime minister and asked me to go home.

A little while later, Verma called me and said that
Narasimha Rao was appreciative of what I had done and felt that, with the preamble, we might still be able to get the industrial policy reforms through. Moreover, the prime minister had made some additions after consulting the finance and commerce ministers. The actual content of the cabinet note, however, remained unchanged.

The preamble read thus:

Policy Objectives:

Pandit Jawaharlal Nehru laid the foundations of modern India. His vision and determination left a lasting impression on every facet of national endeavour since Independence. It is due to his initiative that India now has a strong and diversified industrial base and is a major industrial nation of the world. The goals and objectives set out for the nation by Pandit Nehru on the eve of Independence, namely the rapid agricultural and industrial development of our country, rapid expansion of opportunities for gainful employment, progressive reduction of social and economic disparities, removal of poverty and attainment of self-reliance, remain as valid today as at the time Pandit Nehru set them out before the nation. Any industrial policy must contribute to the realisation of these goals and
objectives at an accelerated pace. The present statement of industrial policy is inspired by these very concerns and represents a renewed initiative towards consolidating the gains of national reconstruction at this crucial stage.

In 1948, immediately after Independence, Government introduced the
Industrial Policy Resolution. This outlined the approach to industrial growth and development. It emphasised the importance to the economy of securing a continuous increase in production and ensuring its equitable distribution. After the adoption of the Constitution and the socio-economic goals, the Industrial Policy was comprehensively revised and adopted in 1956. To meet new challenges, from time to time, it was modified through statements in 1973, 1977 and 1980.

The Industrial Policy Resolution of 1948 was followed by the Industrial Policy Resolution of 1956 which had as its objective the acceleration of the rate of economic growth and the speeding up of industrialisation as a means of achieving a socialistic pattern of society. In 1956, capital was scarce and the base of entrepreneurship was not strong enough. Hence, the 1956
Industrial Policy Resolution gave primacy to the role of the State to assume a predominant and direct responsibility for industrial development.

The Industrial Policy Statement of 1973, inter alia, identified high priority industries where investment from large industrial houses and foreign companies would be permitted.

The Industrial Policy Statement of 1977 laid emphasis on decentralisation and on the role of small-scale, tiny and cottage industries.

The Industrial Policy Statement of 1980 focussed attention on the need for promoting competition in the domestic market, technological upgradation and modernisation. The policy laid the foundation for an increasingly competitive export base and for encouraging foreign investment in high-technology areas. This found expression in the
Sixth Five Year Plan which bore the distinct stamp of Smt. Indira Gandhi. It was Smt. Indira Gandhi who emphasised the need for productivity to be the central concern in all economic and production activities.

These policies created a climate for rapid industrial growth in the country. Thus on the eve of the
Seventh Five Year Plan, a broad-based infrastructure had been built up. Basic industries had been established. A high degree of self-reliance in a large number of items—raw materials, intermediates, finished goods—had been achieved. New growth centres of industrial activity had emerged, as had a new generation of entrepreneurs. A large number of engineers, technicians, and skilled workers had also been trained.

The Seventh Plan recognised the need to consolidate on these strengths and to take initiatives to prepare Indian industry to respond effectively to the emerging challenges. A number of policy and procedural changes were introduced in 1985 and 1986 under the leadership of Shri Rajiv Gandhi aimed at increasing productivity, reducing costs and improving quality. The accent was on opening the domestic market to increased competition and readying our industry to stand up on its own in the face of international competition. The
public sector was freed from a number of constraints and given a large measure of autonomy. The technological and managerial modernisation of industry was pursued as the key instrument for increasing productivity and improving our competitiveness in the world. The net result of all these changes was that Indian industry grew by an impressive average annual growth rate of 8.5% in the Seventh Plan period.