In the press conference announcing he will retire next year, Manmohan Singh, India’s prime minister, predicted that “history will be kinder to me than the contemporary media”. That is the kind of thing that disappointed and embittered politicians often say. But, in Singh’s case, I think it is undoubtedly true. In fact, Singh is likely to go down as a man who, more than any other politician, helped to transform modern India.
Singh’s most important work was done, not as prime minister, but as finance minister. When he was appointed in the middle of 1991, India was on the point of bankruptcy. As he later explained: “There were no foreign lenders willing to finance our current-account deficit. Our foreign exchange had disappeared.” Singh’s message to Narasimha Rao, the then prime minister, was both bleak and honest. “I said to him that we are on the verge of collapse…We must convert this crisis into an opportunity to build a new India.”
Singh, who is a quiet and scholarly man brought up in the Indian tradition of socialist economics, was an unlikely liberal reformer. But he moved boldly. Together with the trade minister, Palaniappan Chidambaram, he started to abolish export subsidies and to liberalise India’s suffocatingly bureaucratic trade regime. The most important step was to take on the “licence Raj” – the system of government permits that regulated who could open a new business or offer a new product. In July 1991, Singh announced a dramatic reduction in the number of industrial sectors controlled by the state.
Over the following two years, the Rao government – inspired by Singh – followed up with a series of dramatic reforms. Industrial licensing was virtually abolished. Businesses such as telecoms, airlines and banking were opened up to the private sector – and all three are booming in modern India. Obstacles to foreign investment were greatly reduced. Tariffs and taxes were both cut. Interest rates and exchange rates were liberalised.
A record like that is enough to secure Singh’s place in the history books and in the pantheon of liberal economic heroes. But it also makes his much less exciting tenure as prime minister, from 2004 onwards, even more of a disappointment and mystery. Many hoped for another round of dramatic reforms for an Indian economy that still remains hidebound by bureaucracy and suffocatingly slow procedures. But not much happened. Why? Perhaps because there was no crisis to compare with the urgency of the near-bankruptcy of 1991. A period when the economy was growing and the state coffers were full, made it harder to conjure up the same reforming energy. Also, Singh was relatively old when he became prime minister and he is now 81.
However, even as prime minister, Singh does have real achievements to point to. India’s relationship with its nuclear-armed and dangerously unstable neighbour, Pakistan, is one of the world’s most dangerous flash points. Singh’s government has handled it with admirable calm, particularly after the terrorist attacks on Mumbai in 2008, which were organised on Pakistani soil.
Singh’s simple lifestyle and reputation for personal incorruptibility also matter in modern India, where corruption is such a corrosive issue. His critics probably had a point when they argued that the Singh administration could and should have done more to tackle official corruption. But, despite opposition attempts to implicate Singh personally in graft scandals, very little dirt has stuck to him. Ironically Singh – the man who more than any other created the conditions for a brash new India to emerge – personally epitomises the modest style of an earlier era.