To the Brink and Back: India’s 1991 Story (6 page)

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 would become the commerce minister in Rao’s government—who was the principal author of the idea of a separate programme of action as well as its contents. I could see that Pranab Mukherjee was not entirely convinced that we had done a wise thing, but Chidambaram was very persuasive and had his way.

In the ‘First 100 Days’ section of the 1991 manifesto, the Congress pledged to, among other things:

* Arrest price rise in essential commodities and, in particular, roll back prices to levels obtaining in July 1990 in the case of

1.    Diesel;

2.    Kerosene;

3.    Salt;

4.    Edible Oils;

5.    Cycles and two-wheelers;

6.    Electric bulbs;

7.    Cotton sarees and dhotis of 40s count or below;

8.    Stoves including smokeless chulhas;

9.    Newsprint;

10.  Postcards, inland letters and envelopes.

Actually, somebody should have questioned the practicality of this pledge but there was no time for a discussion. The manifesto had to come out quickly since it had already been delayed and, in any case, the general opinion was that manifesto promises are meant to be just that—promises to make the party appear good.

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.

This admission was naturally played up the next day in all newspapers and 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 and said that the finance minister’s statement was a huge embarrassment and was politically most unwise. 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 realize 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.

n 26 June 1991, I met
Gopi Arora, then India’s executive director at the IMF, and for many years a close adviser of both Indira and Rajiv Gandhi. He was visiting New Delhi. It was he who had first got me into the Ministry of Industry in August 1985. We had become close even though I was not part of the ‘left brigade’ of which he had been a leading light.

Arora told me that our credibility was rock bottom but that Manmohan Singh’s appointment as finance minister had aroused considerable hopes and expectations. He went on to add that his experience with the prime minister over the past decade told him that he was very cautious and indecisive. Arora also said that he had conveyed to the prime minister that I would be very useful to him and that I should be given wide space to function.

Arora’s concern was that devaluation was essential, but given the Congress’ views on it, clouded by the June 1966 experience,
²⁴
he was not very hopeful. Devaluation apart, his main concern was with the broader reforms agenda. He needed something urgently to convince the IMF board that the
Narasimha Rao government meant business, could be taken seriously, and was also committed to new thinking. He told me that he had spoken to the prime minister and finance minister at length and he wanted me to put together some ideas quickly that he could use in his
discussions at the IMF.

That very night, I jotted down a few thoughts and showed them to the prime minister late at his residence. He liked what he saw but wanted to make no commitments. He believed that the note I had prepared could be sent to Gopi Arora ‘informally’—not as a statement of official policy but as a summary of the directional shifts we were contemplating. Clearly, Rao wanted to maintain an element of deniability in case anything went wrong or the note leaked.

Thus, it was that on 27 June 1991, I used the fax machine in Jawahar Bhavan—in the custody of
R.D. Pradhan who was managing the election campaign management office of the Congress—to send the note to
Gopi Arora.
²⁵

Arora thanked me for my initiative and said that my comments would be very useful in his meetings with the managing director of the
IMF and other senior officials. As we had agreed, no mention was made of devaluation in the faxed note.

26 June 1991 was also the day the prime minister met some key opposition leaders separately. These included
Chandra Shekhar,
V.P. Singh,
L.K. Advani,
²⁶
Harkishan Singh Surjeet
²⁷
and some others.

The next day, he called an all-party meeting. Those who attended included L.K. Advani,
George Fernandes,
²⁸
Somnath Chatterjee,
²⁹
Indrajit Gupta,
³⁰
Madhu Dandavate,
³¹
P. Upendra,
³²
Harkishan Singh Surjeet and
Yashwant Sinha. Senior officials were also present. There was some bonhomie given that the prime minister had been in office for under a week, and also because he knew each of those attending very well. The finance minister, too, was no stranger to the audience. The meeting served as a good political gesture so very early in the game and the meeting lasted about an hour-and-a-half.

The finance minister gave an extensive briefing on the state of the economy, a comprehensive picture of the financial crisis facing the country, and a clear signal that a default on international payment
obligations had to be averted at all costs. He also indicated that talks had already started with institutions like the
IMF and the World Bank, who had been friends of India.
³³
There was no endorsement for the course of action the finance minister was recommending and seeking support for. But the leaders of the political parties appeared reconciled to the idea that some drastic steps would have to be taken to preserve and protect India’s global prestige. However, there was also an all-round view that under no circumstances could subsidies be sacrificed at the altar of IMF support.

I had been in Jamaica in the late 1970s when that country had taken IMF assistance and had seen ‘It’s Manley’s Fault (IMF)’ scribbled on walls—in reference to the role that the country’s prime minister,
Michael Manley had played in that episode.
³⁴
I was beginning to wonder when there would be graffiti, especially in Calcutta (now Kolkata), saying, ‘It’s Manmohan’s Fault!’
³⁵

²⁴
In June 1966, Indira Gandhi had devalued the rupee substantially. This is discussed later in the book.

²⁵
R.D. Pradhan in
My Years with Rajiv and Sonia
describes this event but sadly, gets the dates wrong. He says it happened on 22 June. It could not have since the note itself is dated 27 June in the original.

²⁶
L.K. Advani is a leader of the BJP, and during Rao’s tenure, was the leader of the opposition.

²⁷
Harkishan Singh Surjeet was a CPM (Communist Party of India [Marxist]) leader.

²⁸
George Fernandes had been railways minister in the V.P. Singh government and was a key member of the Janata Dal.

²⁹
Then a member of the CPM, Somnath Chatterjee was an MP from Bolpur, West Bengal.

³⁰
From the CPI (Communist Party of India), Indrajit Gupta was an MP from Midnapore, West Bengal.

³¹
Madhu Dandavate was finance minister in the V.P. Singh government and a Janata Dal MP.

³²
P. Upendra of the TDP had been the leader of the opposition in the Lok Sabha during the prime ministership of Rajiv Gandhi.

³³
In a rare joint statement issued on 21 May 1991, reflective of the special relationship that India had enjoyed with the IMF and the World Bank for almost four decades, Barber Conable, president of the World Bank, and Michel Camdessus, managing director of the IMF said: ‘Mr. Rajiv Gandhi’s death is a tragic loss for India and the international community at large. The Bank and the Fund have long been associated with India’s economic development. This will continue. During the recent Interim and Development Committee meetings in Washington in April, an informal meeting of the major donors of the Aid-India Consortium was held to discuss India’s economic and financial situation. The Indian authorities said then that they were preparing, in consultation with the Fund and the Bank, a programme of corrective policies aimed at strengthening their economy. We will continue to work to that end and thus to provide the basis for support by the Fund, the Bank, and all other members of the India Consortium, which remains strongly committed to India’s economic development.’