Balbir Punj
While the media continues to focus on aberrations like the unfortunate death of Shaktimaan, the Uttarakhand Police horse, the big story of the Indian economy taking a U-turn, has been conveniently ignored. Meanwhile, Reserve Bank of India Governor Raghuram Rajan’s remark that, in the land of the blind, the one-eyed man is king, has underlined the reality that the Indian economy is recovering fast, and is robust in the midst of a global downturn.
However, behind this emerging success story is a tale that needs to be recalled. Some 25 years ago, when India faced virtual bankruptcy, the Congress Government at the Centre took a bold step to disband the Nehruvian model control-and-command economy and opt for a free-market structure.
Was the decision facilitated by the fact that a non-Gandhi family Congress leader was the Prime Minister of India at that time? This question notwithstanding, no one can fail to acknowledge that Prime Minister PV Narasimha Rao and his non-political economist Finance Minister Manmohan Singh had the guts to take this decision, even as the Government was hanging by a thin thread of majority in Parliament.
There is no doubt that the switch from licence raj to a market economy did much good, not only to the Indian economy but also to the Government within a short span of time. In 1991, we had foreign exchange reserves just about enough to finance imports for a fortnight and a miniscule export earnings. In just a year of market economy, this rose to a three-month-reserve. India gained recognition at the global table and ended its reliance on aid from the International Monetary Fund and others lenders.
The transformation of the Indian economy from being supply-determined to demand-driven was due to the adoption of a market economy. No more was there a waiting period for cars and scooters; the housing and road construction industries were drawing down rural unemployment; shortage in automobiles was eliminated. The automobile industry, which welcomed several foreign firms that set up factories and distribution agencies in India, become a big employer.
Under the AB Vajpayee regime from 1998, the market economy transformed the face of India. The telecom revolution of the Vajpayee regime put a mobile phone in the hands of 300 million people. It also facilitated cheaper call rates and affordable mobile phones. Under this Government, the Indian state got out of businesses like hotels, enabling a surge not only in new constructions but also renewed old ones.
A new programme of laying highways, expressways and rural roads also brought a large number of Indian and foreign construction firms into the limelight. Yet another employment creator was the low-cost private sector airline. Now the middle-class traveler could afford air travel as competition between airlines brought down air ticket prices. The Vajpayee regime brought the 21st century to India.
Under the socialist miasma, for instance, India was promised indigenous small cars crawling over its roads. Middle-level cars like the SUVs were declared luxuries not suitable for socialist India. And even the small car was to be built in the public sector.
Awaiting the small car from the public sector, the production of medium cars like the Ambassador and Fiat was severely restricted to some 30,000 units a year. The result was just like the chaos that Mao’s communism created in China – 10 to 15 yearlong waiting lists and quotas for a poor quality car. But even this poor quality car, with no new innovation, created a thriving black market with under-the-table sales as no other brand was available and quota cars could be obtained through influence by people who did not need it.
What happened to the small car finally is a reminder of the corruption and nepotism that characterised Congress regimes. In 1962, JRD Tata proposed to Jawaharlal Nehru that he will build a small car within reach of the Indian middle class. But the Prime Minister rejected the offer as the official policy was to build the car in the public sector alone.
