Atal Bihari Vajpayee's approach to economic issues had the common touch

Two of the biggest economic legacies of Atal Bihari Vajpayee’s tenure were his push for privatisation and highway construction.

The golden quadrilateral project linking Delhi, Kolkata, Chennai and Mumbai, followed by the North-South East-West, became the high point of the first NDA government. Vajpayee had stalwarts like Nitish Kumar and Rajnath Singh as Union surface transport minister when the ministry had both highways and maritime transportation under it. Road construction got into mission mode when little-known BC Khanduri, a retired army man from Uttrakhand who was close to Vajpayee, became highways minister.

The length of national highways increased to 58,125 km in 2002-03 from 34,849 km in 1996-97. The mega push came from the Rs 1 cess on petrol and diesel. Later, rural roads too were funded from the road cess kitty, giving the infrastructure sector its golden era.

"Earlier there was no such concept of taking one huge infrastructure project. The National Highways Authority of India (NHAI) was created as an instrument to achieve that objective and the first edition of the NHAI was a fully empowered body as the government realised that autonomy and empowerment were needed for its functioning," former road secretary Vijay Chhibber said.

It was a time when the now Department of Investment and Public Asset Management was a full-fledged Ministry of Disinvestment, first helmed by Arun Jaitley and then by Arun Shourie. It was during this time that the government privatised a number of state-owned enterprises, including marquee brands like Maruti Suzuki (then known as Maruti Udyog), Modern Foods, Hindustan Zinc, Balco, Jessop and Co, IBP Co Ltd, Videsh Sanchar Nigam Ltd, 18 hotel properties of ITDC, and others.

“When I look at my 40 years of service, I don’t think I have spent a period like this. The bureaucracy and the political leadership were always on the same page. It was totally path-breaking that he started privatisation, which is a difficult process not only in India but in any country,” Pradip Baijal, who was disinvestment secretary from December 1999 to February 2003, told Business Standard.

Baijal remembers Vajpayee as a prime minister who had the remarkable courage to approve, through his cabinet, almost all the privatisation proposals taken to him, much to the chagrin of the opposition, including left parties, and employees of public sector units (PSU), in a country which was broadly left-of-centre.

“It showed remarkable courage that he approved everything that we took to him. The left did not like it, PSU employees who did not have to perform and got bonuses did not like it. He laid down clear principles for us to follow, and we did our work,” Baijal, who retired as chairman of the Telecom Regulatory Authority of India in 2006, said.

Baijal recalled the work that went behind two of the biggest privatisation initiatives: Maruti Suzuki, in which it divested its stake to Suzuki Motors, and VSNL, which was sold to Tata Communications.

“Maruti’s was impossible privatisation. It was 50 per cent under Suzuki. Under the agreement, we could not sell the rest of the stake to anyone but Suzuki. But we created circumstances that those guys had to pay us a very good price. We were able to do that because we had the full confidence of the PM. Similar was the case of VSNL. We had two huge competitors, Tata and Reliance. There was not a complaint regarding the process,” he said.

“The government had said that no privatisation would take place without a competitive bid. Only when people start deviating from a set process is when problems arise. I remember discussions with Atalji, he never allowed anything unless there was a level playing field and clear competition.” 

Controversies surrounding privatising PSUs, however, led to abandoning strategic disinvestment as a policy by subsequent governments. Nonetheless, infrastructure gave the Vajpayee government its India Shining moment.

"He (Vajpayee) did a huge amount of work in the infrastructure sector because he believed that infrastructure development gave a stimulus to the economy,” said Kushal Kumar Singh, Partner, Deloitte Touche Tohmatsu India LLP.

The NHAI, an autonomous and independent body that was formed primarily to connect the country via roads and create job opportunities, has now transformed itself into a robust state-owned company that has taken upon itself the task of constructing over 16,000 km of highways during the current financial year.

Some of Vajpayee’s other economic initiatives included the thrust on telecom and agriculture. Mobile tariffs fell drastically between 1998 and 2004, and he ushered in the National Telecom Policy in 1999.

“Vajpayee wasn’t an economist by training, but whenever any big policy matter or something which involved economics came to him, he used his experience and intuition to take decisions and more often than not they were spot on,” said Sompal Shashtri, a former member of the Planning Commission.

Shashtri, who was a key member of the government then, cites the example of the MSP for wheat in the 1998-99 crop season. He said the Commission for Agricultural Costs and Prices (CACP) wanted it to be raised by just Rs 50 per quintal over the previous year’s Rs 460 per quintal. But, the cost of production had gone up owing to rise in diesel rates.

Shashtri said he tried convincing Vajpayee that unless the purchasing power of farmers was enhanced, India’s manufacturing sector won’t grow by much as farmers constitute an important consumption segment. Vajpayee called a meeting of the CACP and tried reasoning with them, but when the agriculture department showed little willingness to accede to his request, he brushed aside all opposition and worked out a compromise, as result of which the MSP was raised by Rs 80 per quintal. “He was highly receptive to ideas and counter-points on economic issues,” Shashtri said.