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India in crisis-reform mode

The 'game changers' in modern India's history are all the result of crises, not foresight and planning, says Shankkar Aiyar

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The author’s central thesis is that every major change in modern India has come about in the wake of a crisis — due to accidents of history, not through decisive action or the exercise of vision or imagination. As evidence, he cites seven “game changers”: the economic liberalisation of 1991; the of the sixties; bank nationalisation in 1969; Operation Flood in the seventies; the mid-day meal scheme of 1982 in Tamil Nadu (the first of its kind in India); the software revolution of the nineties; and the of 2005.

attributes Indian leaders’ inability to anticipate adversity and act before catastrophe strikes to the approach to development adopted after 1947. The countries that have succeeded, he writes, chose inclusive politics and inclusive economics. How does he explain the fact that rapidly growing China lacks an open political system, as did the Asian Tigers at the peak of their growth trajectories? India chose a combination of inclusive politics and a closed economy, with a dominant role for the state in rebuilding the economy. All the problems that followed, he argues, flowed from the overarching role of the state.

The only positive was that every crisis saw a saviour take charge and find a solution; the tragedy was that after the immediate problem was resolved, the old inertia returned. Thus, after the Green Revolution there has been no impetus to improve agricultural productivity, though a burgeoning population could yet necessitate food imports. And after the 1991 liberalisation helped kick-start the economy, the government retained discretionary clearances and is still ambivalent about reforms.

Despite India’s history of famines, Nehru made no push to transform agriculture, placing his faith in heavy industry to deliver growth, and campaigning for food aid from the West. Predictably, by the mid-fifties, food shortages were felt, leading to heavy imports. But it was only when the monsoon failed in both 1965 and 1966, foodgrain output fell alarmingly and imports had to be resorted to, that Agriculture Minister C Subramaniam’s blueprint for agricultural revival was fast-tracked, leading to the Green Revolution.

The trigger for bank nationalisation in 1969, by contrast, was no crisis – as Mr Aiyar concedes – but Indira Gandhi’s need to vanquish the Syndicate by painting them as pro-rich and herself as pro-poor. A section of the Congress had been demanding nationalisation since 1948, because banks – mostly owned by big business – were reluctant to open rural branches; but successive governments skirted the issue. Mr Aiyar notes that nationalisation led to branch expansion, especially in rural India, enabling increases in India’s gross savings ratio, in rural savings and in the share of credit to rural areas. But this is a post-facto rationalisation.

Operation Flood happened in circumstances similar to the Green Revolution. Milk production was stagnant, necessitating copious imports; yet, despite the success of the Kaira district co-operative in Anand, Verghese Kurien could not persuade bureaucrats to push for wider replication of the model. It was only a fortuitous 1968 visit to Anand by L P Singh, ICS, then Union home secretary, who was impressed by what he saw and initiated a series of meetings, that enabled Operation Flood to take off in 1970.

Mid-day meals in schools (aimed at improving enrolment and retention rates) and citizens’ right to information (to enable them to participate in governance) saw bureaucratic and political resistance at its worst. In both cases, it was only after the UPA’s election victory in May 2004 that things changed. The Left Front and the National Advisory Council pushed the UPA government to include mid-day meals in the Common Minimum Programme. The NDA’s flawed Freedom of Information Bill was passed in January 2003, and it was not until May 2005, a year after the UPA came to power, that a new Right to Information Bill was finally passed in both Houses.

The initial impetus for India’s software revolution was provided not by an accident but by a conscious act of policy — the rightward course that Indira Gandhi steered when she returned to power in 1980. She mended fences with the US, having recognised that India needed access to American technology to revive its nuclear programme and for its foray into computerisation. But the three key components the software exports sector required – components, telecom links and a liberal foreign exchange regime – were all shackled. A liberalised software policy was unveiled only after Narasimha Rao dismantled the licence quota raj.

Not every crisis has a happy ending, Mr Aiyar cautions, in a well-researched and well-argued book. Lack of energy security and neglect of the rural economy continue to threaten growth; insurgency is rife in hundreds of districts; and, most important, critical policies are “held hostage as the Centre and the states war over who has the right to formulate policies and who will bear the fiscal consequences”. Yet, he concludes, successive governments continue to demonstrate their inability “to think imaginatively and act decisively”. Few would disagree.


 

ACCIDENTAL INDIA
A History of the Nation’s Passage Through Crisis and Change
Shankkar Aiyar
Aleph Book Company;
352 pages; Rs 695

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