Indian Economy at Sixty Three District Models of Growth
Mahajan, V. S., Political Economy Journal of India
There are three distinct phases of Indian economy during the last sixty years. The first phase starts with Nehru's government--roughly starting in 1950 and continued till his death in 1964; the second phase starts with Indira Gandhi's regime from the mid--1960's to her death in 1984--roughly the same period as of Nehru. The third phase starts from Rajiv's government in 1985 with distinct departure from the earlier two phases of limited restricted approach of Nehru and highly restricted approach of Indira Gandhi.
Rajiv's approach was in the favour of liberal economy. He wanted to do away all the restrictions and bring in an era of open economy. But unfortunately he was unsuccessful in it when senior congress leaders warned him about the consequences of such approach and he was thus forced to stick to earlier approach with of course minimum changes here and there. There prevailed a high degree of corruption both among the politicians and bureaucrats. Much of it was due to long time functioning of restrictive economy. The public was highly agitated about government approach towards the common man. Under these circumstances, little surprise that Rajiv's government was defeated in the next elections; and a new coalition government was elected at the centre.
The new coalition also failed to function when there was difference among the ruling leaders and everybody wanted to grab power. The three PM's --V.P.Singh, Charan Singh and Chander Shekhar, each of whom ruled for short time, could not bring about stability. As mis-governance was at its high, it resulted in a heavy loss to the economy, leading to a high debt which India found difficult to clear.
Amidst all the chaos and mistakes, the next elections were held in 1991 resulting in the return of Congress at the centre with a narrow majority. The win by Congress was largely due to the nation's sympathy vote after the death of Rajiv Gandhi. Meanwhile Narasimha Rao was chosen as the prime minister.
The government faced the toughest job of baling out India's shabby economy from the big external debt, which had piled up high. It became difficult to raise loan from the international financial market, because of low credit- worthness of India. As a result, the government approached the World Bank for this, which in turn, agreed to help India provided certain set of conditions were honored by the ruling government, like free the economy from the whole area of restrictive rules and regulations which hindered trade and business, and open its economy to the global economy, which the Indian government agreed to do. The World Bank had also suggested the name of Manmohan Singh to be its finance minister while the government was thinking of Pranab Mukherjee for this office.
It is at this stage that Manmohan Singh emerged as a key figure to execute the whole set of reforms that the world bank wanted while sanctioning the mega loan to India. In fact his emergence from obscurity to the top position in the country was indeed unique.
He was required to seek his membership of Rajya Sabha within a period of six months of his appointment as finance minister. It goes to the credit of Narasimha Rao that he agreed to all the suggestions made by Manmohan Singh and did not interfere in his working. Even when things went wrong, the finance minister was able to sort out them gradually.
Thus the third phase of India's development was of liberal economy, though started by Rajiv Gandhi but not allowed to follow it, it was completed by Manmohan Singh when he was finance minister. It is interesting to note that none of the subsequent governments voted into power after the congress defeat in 1996, interfered with the liberal polices of growth started by Manmohan Singh. Interestingly even the BJP government which had its full five-year term, not only followed what was begun by Manmohan Singh, infact they improved it further by being more liberal and their relationship with the U. …