Reticent, muted and with a ubiquitous pout, Pamulaparthi Venkata Narasimha Rao was the impeccable Machiavelli of Indian politics. At seventy, and with a monk-hood to boot, Mr. Rao was all set to retire and pursue a life of contemplation, when he was catapulted into the eye of a terrible storm. On the 1st of August 1990, one of the world’s premier credit rating agencies, the New York-headquartered Moody’s, placed India on ‘credit watch for possible downgrading’ because, as it explained, ‘political conditions in India have weakened since our initial rating assignment [in 1987]’. Moody’s perceived India as being bogged down by two types of ‘risks.’ One, a shot term liquidity crunch. This risk signaled a short-term liquidity crunch that would leave the nation unable to finance its external imbalance and forcing it to undertake a sharp balance of payments adjustment. The second risk, lay in the fact that the proposed measures to achieve the balance of payments adjustment in the short-term would disrupt the process of structural change, jeopardizing political support for efforts to improve India’s international competitive position, in the medium term. The proverbial straw that broke the camels back however came in the form of the resignation of Chandra Shekhar, the Prime Minister forming part of a minority Government formed with the support of the Congress. Chandra Shekhar who seemed to have had enough of the leader of the Congress Party and former Prime Minister Rajiv Gandhi’s repeated threats to pull the rug from under Chandra Shekhar’s feet submitted his resignation. A hasty election and a horrendous assassination later, Mr. Narasimha Rao, amidst the most trying of economic and political circumstances, found himself at the highest helm of the nation’s affairs.
Sanjaya Baru, a political commentator and policy analyst, served as Secretary General of the Federation of Indian Chambers of Commerce and Industry (FICCI), prior to which, he was Director for Geo-Economics and Strategy at the International Institute of Strategic Studies. However, he is known for his proximity to former Prime Minister Manmohan Singh, in his capacity as the media advisor and chief spokesperson (PMO) from May 2004 until August 2008. A journalist and author of formidable mettle, Mr. Baru was also associated in various capacities with the Economic Times. Times of India, Business Standard. In “1991”, Mr. Baru deftly crafts the story of one man’s political astuteness, social acumen and economic alacrity that not only led India to stave off what might have been the most disastrous of all economic crisis, but also, in doing so, laid the path for a stupendous growth and development that is still continuing.
Following the ghastly assassination of Rajiv Gandhi and some deft political maneuvering by his supporters, a polyglot with a voracious reading appetite, Mr. Narasimha Rao (or PV as Mr. Baru chooses to address him throughout his book), was elected as India’s ninth Prime Minister. However, as alluded to in the preceding paragraphs, the adverse circumstances of the time ensured that his stint at the top would, by no stretch of imagination be a breeze. Due to years of mismanagement and myopic polices courtesy the Nehru-Gandhi dynasty, “the current account deficit (CAD), that is the sum of the deficit in foreign trade and in capital flows as a share of national income, went up from -1.7 per cent of GDP in 1980-85 to -2.9 per cent in 1985-90. The total external debt trebled from US$20.6 billion in 1980-81 to US$64.4 billion in 1989-90, with the share of external debt in national income going up from 17.7 per cent to 24.5 per cent during that period. In all this, the share of private debt kept rising as the government liberalized external commercial borrowing and allowed Indian companies to borrow abroad. The key factor contributing to the sharp rise in CAD during the 1980s was a steep increase in imports—especially defense imports—and in external commercial borrowings of the private sector. After hovering below 3 per cent for a long time, the share of defense spending in national income went up to 3.6 per cent in 1986-87 and 1987-88, with most of this increased spending financing increased defense imports.”
Twenty metric tonnes of confiscated gold, worth US$200 million, had to be made available by the Reserve Bank of India to the State Bank of India for sale, with a repurchase option, to the Union Bank of Switzerland. This was the first time India was selling gold to avoid default and to ensure that its external payment obligations were met. “Both the Bank of England and the Bank of Japan demanded the actual shipment of gold to their vaults. It would not just be a paper settlement. Gold bars of acceptable quality had to be airlifted and sent out. “
Rao’s cutting-edge political acumen came to the fore immediately after assuming office in the form of his appointments of credible personnel to various portfolios of importance. J. N. Dixit, one of India’s most gifted and extraordinarily talented diplomats was made foreign secretary in December 1991. A seasoned China-hand, Shyam Saran, assumed office as joint secretary, while a bright young diplomat, Ramu Damodaran, assumed office as PV’s personal secretary. “PV also counted on Ronen Sen, Rajiv Gandhi’s closest diplomatic aide and someone who was au fait with Rajiv’s key initiatives with the US, China, USSR and Pakistan.” However, when it came to the crucial and unenviable role of Finance Minister, the man who would subsequently go on to craft the watershed policy that liberalized India from the shackles of Nehruvian socialism, Dr. Manmohan Singh, was surprisingly not the first choice of PV. Post deliberations with his good friend and former Governor of Tamil Nadu, P.C.Alexander, PV homed in on Dr Indraprasad Gordhanbhai Patel. “IG” as he was known fondly to those well acquainted with him, Patel came with a stellar reputation attached to him. After a stint with the United Nations Development Programme (UNDP), Patel was made the Governor of the Reserve Bank of India (RBI) in 1977 by the then Prime Minister Morarji Desai. “Soft-spoken, dapper and with an interest in the arts and music, IG was a renaissance man. He related with equal ease to fellow economists, civil service colleagues and politicians of all hues. Despite his long years in government he retained an academic’s curiosity and easy way of dealing with younger people. As director of the Indian Institute of Management-Ahmedabad(IIM-A; 1982-84) and later as director of the London School of Economics and Political Science (1984-90), IG was very popular with his students.”
However, when IG refused to take up PV on his offer, the call went out to the soft-spoken Dr. Manmohan Singh to assume control of the Finance Ministry. PV also gave Mr. Singh a free hand to assemble his team. The result was a dazzling array of intellect and intuitive abilities. Montek Singh Ahluwalia was brought in as Secretary, economic affairs, and Ashok Desai as Chief economic consultant. The team included a roster of capable IAS Officers of the likes of K.P.Geethakrishnan, Y.V. Reddy, N.K.Singh, D. Subbarao, Valluri Narayan and V. Govindarajan. Y.V. Reddy and D. Subba Rao, of course would go on to be known as Central Bank Governors.
A soft-spoken external demeanour that made PV look like a reluctant mendicant, belied a will power that was cast in iron. The man neither had time for fools nor was inclined to tolerate political shenanigans and chicanery. His ability to deal a strong hand when the situation warranted – but without losing even a shred of composure in the process – was legion. “In July 1992, Commerce Minister Chidambaram, one of the ministers Rajiv first drafted into government, offered to quit following allegations of financial impropriety on his part in a matter pertaining to the ownership of shares in Fairgrowth Financial Services, a Bangalore-based company charged with involvement in a stock market scam. Chidambaram believed he had done nothing wrong and was being politically targeted. He publicly offered to resign at a press conference. He had hoped that the prime minister would reject his offer and ask him to continue. This would have vindicated him. Most Congress MPs regarded Chidambaram as uppity and arrogant. That is partly a reflection of his demeanour. Tall and good looking, whether in his starched white veshti and crisp shirt or in jeans and T-shirt, Chidambaram wears his brilliance on his sleeve. He assumed the prime minister would turn his offer down. PV was, however, very annoyed with Chidambaram. How could a minister go public with a resignation tendered in response to allegations of misconduct and then expect the prime minister to reject it, thereby giving him a clean chit? What did PV owe Chidambaram? Nothing. So, the prime minister promptly accepted the minister’s resignation. Chidambaram was stunned. More than a message to Chidambaram, it was a message to all his Cabinet colleagues—that they should not take the prime minister for granted.”
A similar fate befell Civil Aviation Minister, Madhav Rao Scindia, who made a capital show of resigning his post owning moral responsibility for a tawdry handling of events by the Delhi Airport, following a crash-landing of an Uzbekistan Airways flight in 1993. Not one to put up with either pettiness or petulance, the no-nonsense PV, put the Maharajah of Gwalior and a Gandhi backer to utter embarrassment by accepting the resignation.
Even where PV harboured doubts about the instituting and implementing a particular policy he deferred to the wisdom of the experts – in spite of his reservations – if he could be convinced of the plan’s efficacy or outcome. A classic case in point – the devaluation of the Indian Rupee. “On 1 July, the rupee was devalued by around 9 per cent and on 3 July there was a further devaluation by around 11 per cent, with the adjustment working out to a 17.38 per cent devaluation. The rupee slipped from Rs 17.9 to a US dollar to Rs 24.5. By the end of 1992 it was approximately Rs 31 to a dollar and remained. The entire exercise was dubbed ‘hop, skip and jump’ by Singh and Rangarajan. It was a game the two played in secrecy. But while Singh had secured the prime minister’s authorization, PV developed cold feet after the first step, on 1 July. Devaluation was a bad word in Indian politics. PV would have known of the 1966 devaluation episode and how Indira Gandhi had been criticized for it…. So, when PV’s critics attacked the government for the first step devaluation, the prime minister advised the finance minister to hold back the second step. But Singh, who was familiar with the 1966 episode (the economists who handled it were all his mentors or friends—K. N. Raj, I. G. Patel, D. R. Gadgil, Jagdish Bhagwati, P. N. Dhar and Manu Shroff), decided that if the second step was not taken as planned it might never be taken. ‘The first step was to test the waters,’ Manmohan Singh recently revealed. ‘So, although there was opposition to the move, it was manageable. So, I said that by July 3 , we must complete the full thing. C. Rangarajan was the Deputy Governor [of RBI]… Prime Minister Narasimha Rao had doubts over the second instalment of the exchange rate adjustment and told me, in fact, to stop it. But when I called up Rangarajan, he said that he had already shot the goal.’ Once the two-step action was taken, government spokespersons moved fast to assure the markets that there would be no further devaluation. The rupee had found its warranted level. The markets stabilized.”
P.V.Narasimha Rao led the first non-Nehru-Gandhi Government that ran a full term since the beginning of the Indian Independence in 1947. He transformed Indian politics from a family run feudal proprietary denomination into an open, transparent and meritocratic level playing field. This he did by juxtaposing diplomacy with determination. “The Nehru-Gandhi family retainers and cronies, the nondescript men and women who acquired power and wealth doing the family’s bidding, were in fact doing a disservice to the Congress by repeatedly emphasizing the primacy of the family in the party. This was the way smaller, regional, sectarian and caste-based parties were run, with political power passing from one generation to the next.” However, such an exemplary achievement came at a heavy price. PV was abhorred by his own party following the completion of his tenure. While Dr. Manmohan Singh went on to finish two turbulent terms as a Prime Minister, PV’s legacy was relegated to the confines of a silent history. The ugliness of fractal allegiances and party politics shone it its most ugly form, when following his demise, “the party shut the gates of its headquarters and refused to bid official farewell to a former president. His crime: seeking to end the proprietary control of the INC by the Nehru-Gandhi family. PV died on 23 December 2004. In the decade since then the only Congress leader who has regularly and religiously paid tribute and honoured PV’s memory on the occasion of his birth anniversary has been Manmohan Singh— the man whose political career was made by PV. But even Manmohan Singh was unable to honour PV with a Bharat Ratna during his decade-long tenure as prime minister. The party had again become a proprietorship.”
The fact that the man who in a single swell swoop, liberated the second most populous nation from the draconian vice like grip of a license-permit-quota Raj, is yet to be bestowed upon with the Bharat Ratna, speaks a lot about the credibility, colour and cadence of Indian politics. Once when PV was asked, perhaps, in a jocular vein, about who between PV and Dr. Manmohan Singh ought to be credited for India’s swing in fortunes, replied in his inimitable poke faced fashion, “‘A finance minister is like the numeral zero. Its power depends on the number you place in front of it. The success of a finance minister depends on the support of the prime minister.”
The Zero in 1990 represented just that power. It required PV to alter the 9 preceding it and the rest, as the cliched saying goes, was history.