Strategic dimension to 1991

Manmohan's budget speech redefined national power

Twenty years ago on this day, 24th July 1991, India’s finance minister Manmohan Singh wound up his historic Union budget speech with the famous words: “No power on earth can stop an idea whose time has come. I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea.”

While those stirring words were met with all-round applause in parliament, the import of the intellectual construction underlining that last sentence of the budget speech only became clear to India and the world much later. Indeed, it took the Pokhran-II nuclear tests of 1998 for the world to wake up to a new India. An India made confident by the success of its economic reforms programme of 1991-95.

In 1991 India went begging around the world for help. It mortgaged gold to get some succour. By 1998 India was confident enough to stand up to the threat of economic sanctions imposed by the world’s two strongest economic powers, the United States and Japan. When finance minister Manmohan Singh crafted his budgetary and economic strategy in the summer of 1991 it was obviously clear to him that the reason India had failed to secure support till it went down on its knees was because the major powers had neither any stake in India nor saw India as an important player in world affairs. India was dependent on the world, but the world was not dependent on India. This had to be changed. That was the strategic project of the 1991 reforms.

By opening up the Indian economy to external capital and trade flows, the reforms of 1991 created a stake in India for the rest of the world. By making the Indian economy more globally competitive the reforms aimed to help India deal with the world with greater confidence. The kind of confidence that India showed barely eight years later when it declared itself a nuclear weapons power.

This was also the singular lesson of the collapse of the Soviet Union and the rise of China. Even though it was armed to its teeth with nuclear weapons, that more than matched US nuclear capability, the Soviet Union collapsed under the weight of its own internal contradictions and economic weakness. China, on the other hand, was rising because it had chosen to focus on building its ‘comprehensive national power’. Hence, believed Manmohan Singh and his political mentor Prime Minister P V Narasimha Rao, the real challenge before India was to ensure its “emergence …. as a major economic power in the world.” Power, in the modern world, was solidly based on the foundation of economic performance and prowess. Military power meant little if it was not backed by economic performance. National power is a sum of the military, economic, knowledge, cultural and social power capabilities of a nation.

It is, therefore, a welcome initiative that the Union finance ministry has taken two decades after that historic budget speech to quantify India’s geopolitical and geo-economic power through a new index. The Index of National Economic Power, as the ministry’s Economic Survey of 2010 termed it, is an attempt to capture the multi-dimensional nature of national power, the core being a nation’s economic capabilities and a fitting tribute to the architect of that idea.