India is the greatest functional anarchy in the world – John Kenneth Galbraith in 1960’s
It was a summer solstice like never before. 25 years ago on June 21, 1991 India changed forever. By force or by chance. P.V.Narasimha Rao was sworn in as India’s Prime Minister exactly a month after the brutal assassination of Rajiv Gandhi. He unleashed a swathe of economic reforms which changed the face of India forever. The sleeping tiger was stirred to action.
As we complete 25 years of liberalised India, it is time to take stock. My good friend Kartikeya Kompella has edited a book containing views of the stalwarts of India who saw, participated, precipitated or furthered the liberalisation process. Very well compiled book (What’s Changed, available on Amazon India at 1991 prices!) that gives you more than a glimpse of what’s changed or didn’t in the last 25 years and it’s a must read for all. Bollywood, brands, media, women, philanthropy, education and more has been covered. One miss, I felt. Markets, money and real economics. Kartik is not money minded and hence is excused!
When India got freedom, we were unsure what path to take to build an equitable India. Make money and then distribute or distribute while we make the money. Nehruvian socialism as an idea was torn between the riches of the west and the socialist Soviet bloc. Choosing the middle path, we aimed for mixed economy. Straddling two paths we ended up nowhere. Mixed economy ended up with being a mixed-up economy. Crony capitalists and mafia dons ruled while jholawalas either wrote long articles which no one read or sat in dharnas which no one noticed or even worse ended up being naxal sympathisers.
The 1967 Hazari Committee report is an eye opener. It laid bare details of the shenanigans and strategies applied by industrial houses to play the license raj. The licenses were taken not to build and create a new India but to block others from growing big. The strategy was simple. Apply and take a license to set up an industry but sit tight on it with no action. It prevented others from getting a license thus killing entrepreneurship. “I will not grow, I will not allow you to grow” was the strategy of big corporates. Corruption was rampant and the masses got stuck in the morass as the few pocketed the licenses. Public sector undertakings became the biggest source of industrialisation and also employment with concomitant inefficiencies and bureaucracy.
Crisis is the mother of reforms. In 1991, such was the magnitude of crisis in India that 40 tons of gold was pledged with Bank of England and 20 tons was pledged with Union Bank of Switzerland to get $2.2billion dollars of loan to mitigate the crisis. A plane was charted to carry the gold bars accompanied by finance ministry officials! From the crisis emerged the reforms and Manmohanomics under the stewardship of Chanakya Prime Minister.
After 25 years of reforms have we achieved economic freedom? Harshad Mehta, Ketan Parekh and many more such swindlers gave pain to countless Indians who wanted a share of the new liberalised India. Banking is out of reach of many and money lenders rule the roost in many places leading to tragedies. Mutual funds and life insurance firms did not cover themselves with glory. Far from educating or selling these instruments many big firms converted them into quick rich schemes. Life insurance agents sold their soul and indulged in mis-selling for that alluring foreign trip. Social security in terms of financial security is distant dream for many Indians. True freedom comes when an individual is economically free. Not rich but free.
In these 25 years the world has given up on communism as an economic idea and then gave up on capitalism based on the tragic scenario in the past decade. Western model of capitalism has come into question with the 2008 financial crisis. Joseph Schumpeter’s prediction that socialism will emerge from the decomposition of capitalist society may come true. The emerging economic order is an interesting to watch.
India’s next 25 years are more critical as we have the youngest population in the world. Reforms will make them or they will make reforms. History is in the future and is going to be made by our children.