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Speaking softly & making it stick

By T N Ninan
May 22, 2004 10:37 IST
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In the early 1970s, Manmohan Singh was a mild-mannered academic who went to work on a bicycle and held unfashionable views on economic management.

His thesis that India could successfully compete in world markets didn't have too many takers, though he propounded them at the Delhi School of Economics where he was professor of international trade.

If one were to trace his long and illustrious career in the government, the first question is: how did an academic with views that were unfashionable for his time, find his way into the government?

One answer is that Prof. P N Dhar, who was involved in the very birth of the Delhi School of Economics, and who was familiar with Manmohan Singh's views, happened to become the secretary to the prime minister.

The other answer is that L N Mishra, as the minister in charge of foreign trade, when on his way to Santiago for an Unctad meeting, needed advice on some issues.

En route in New York, he had a chat with Manmohan Singh, who was then with the UN. Mishra liked what he saw and heard. So when the post of economic adviser in his ministry fell vacant, he readily accepted P N Dhar's suggestion that Singh might be the right choice.

N K Singh, who as a young IAS officer was at the time attached to the minister, recalls that the policy environment was definitely hostile to the views that Dr Singh expounded.

Foreign trade was controlled in mindless ways so that it became impossible to export or import, and Dr Singh was constantly battling moves to put more items on the 'canalised' list, and which could then be imported and exported only through the two main public sector trading companies -- which were both inefficient and corrupt.

Dhar was still in the prime minister's office when the post of chief economic adviser in the finance ministry fell vacant in 1973, and Singh found himself as the government's chief pundit at a time when the economy was hurtling into crisis.

Indira Gandhi decided to nationalise wholesale trade in foodgrains in a drought year when there would anyway have been a shortage of grain, causing an unholy mess; and then the first oil shock erupted. Before long India was heading for 30 per cent inflation.

In the summer of 1974, Singh worked with Dhar on a ruthless anti-inflation package that froze the dearness allowance and imposed a drastic squeeze on corporate dividends. The stock market tanked and there was a rash of strikes, but within four months inflation came under control.

Despite that tough lesson in economic management, Singh's most embarrassing moment came when he had moved on to become secretary in charge of economic affairs, and piloted Charan Singh's disastrous Budget of 1979.

The morning after, Singh fielded questions at the traditional post-Budget press conference, and insisted that the Budget would not be inflationary.

But company after company jacked up prices to pass on the taxes that had been introduced on everything from soaps to toothpaste, there was a drought and then a second oil shock, and soon the rate of inflation touched 17 per cent -- helping Mrs Gandhi bounce back to power in the election that followed.

Singh, still only 48, found himself shunted out as member-secretary of the Planning Commission. This was technically a promotion to ministerial rank, but removed from the main government action.

You can't keep a good man down, though, and when the redoubtable I G Patel's term as RBI governor expired in 1982, the mantle fell on Singh. Interviewed shortly before he assumed office, Singh spelt out views that are remarkably consistent with what he did in 1991 and what he says today.

The controls on production and capacity utilisation were counter-productive and meaningless, he said, and should be removed. Physical controls could not be retained in a complex, modern economy and should be replaced with fiscal incentives and disincentives.

This was a straight assault on the licence-permit raj of the time, and but Dr Singh stuck to the party line on some issues: The national consensus was in favour of a strong public sector, he argued, and pointed out that "even the BJP" wanted the public sector to occupy the commanding heights of the economy.

The language might have changed 22 years later, but he said the same thing on Thursday: "The country needs a strong private sector, and it needs a strong public sector." Indeed, the banks, ONGC, GAIL, etc will not be privatised. This is the "commanding heights" argument in different words.

But his most prescient comment of all related to a change of economic tempo that had just happened, and which no one had noticed. The 3.5 per cent "Hindu rate of growth" was a thing of the past; India would grow at a much faster rate from now on, Dr Singh argued. And it has done just that, managing 5.7 per cent since 1980-81.

As RBI governor, his moment of crisis came over the now defunct Bank of Credit and Commerce International. Founded by a very networked Pakistani, BCCI was rumoured to be linked to funny money, but had some backers in the Indian system.

When it applied for permission to open a branch in Mumbai, Singh turned it down -- only to face pressure from Delhi. Unwilling to give in, and unable to withstand the pressure, Singh offered to resign.

He was persuaded to stay on, but BCCI got its licence anyway. The bank went belly up some years later, after being linked to suspicious transactions all over the world, and depositors in Mumbai lost a lot of money.

If you believe what is said in the corridors of the RBI tower in Mumbai, Singh was never very comfortable in the city or in the world of finance. After a three-year stint, he was back in the Planning Commission as deputy chairman, and now got serious lessons in dealing with politicians.

M G Ramchandran, chief minister of Tamil Nadu and barely able to speak after a debilitating stroke, came to discuss his state's annual plan. He had already started giving free mid-day meals for schoolchildren, which Dr Singh and the rest of the Planning Commission considered unsustainable populism.

But as soon as Dr Singh told him the Centre could not support him financially on the scheme, MGR picked up his papers and walked out. Dr Singh ran after him down the main corridor of Yojana Bhavan, but MGR would not be coaxed back.

An official present in the meeting recalls an ashen-faced Singh walking back into his room and saying the discussions on the annual plan were over -- much like discussions with Laloo Yadav on cabinet formation got over on Thursday.

Meanwhile, Rajiv Gandhi as prime minister thought the Planning Commission should be made into a think-tank, like Herman Kahn's Hudson Institute in upstate New York. The Commission's members had no such ambitions, and wanted to confine themselves to the traditional planning job of making financial allocations for different sectors.

Singh himself told Rajiv in a meeting: "I am neither a Herman Kahn nor can the Planning Commission be re-modeled in this fashion." Fed up of the resistance and at what he saw as the Commission's blindness to the role that technology could play in planning, Rajiv lost his shirt and called the Commission a "bunch of jokers" -- a remark that leaked to the press.

Irate Commission members handed in their resignations, and despite his best efforts to calm things down, Manmohan Singh couldn't get the resignations withdrawn.

The crisis blew over only after Rajiv finally said that he had not made the remark attributed to him. A colleague in the Commission recalls Singh warning him at the time: "Don't forget that this is a Mughal durbar."

Meanwhile, Singh had faced a bigger crisis at home. The anti-Sikh riots had unnerved him in 1984, so he sold his house in Model Town near Delhi University and bought a place instead in Chandigarh, where he felt safer.

After his return from the South Commission in 1990, he would try to move base back to Delhi, but gave up the idea once he became finance minister and knew that he could depend on government housing.

In fact, his primary worry in 1996, when he moved out of North Block, was that he would have to drive his own car (he bought a modest Maruti 800) and function without a secretary.

Dr Singh's most memorable years were of course when he was finance minister. A colleague of the time recalls, though, that his first and path-breaking Budget in July 1991 was to provoke a crisis.

A team from the International Monetary Fund came visiting and found that the numbers on tax revenue were not credible; they seemed too optimistic. They confronted the revenue secretary, who apparently disowned his own numbers.

The Fund had thrown India a financial lifeline, but was ready to pull the plug over the issue when word of the crisis reached Dr Singh. The finance minister called in his key officials and asked a blunt question: Have I asked any of you to fudge the Budget numbers?

This version is disputed by another official of the time, who said that disagreements with the Fund over numbers were routine. Also, the numbers weren't wrong, for the year ended with a shortfall on only customs revenue.

But according to the first account, Singh had to inform the prime minister that there was trouble. Recalls an official who was in the ministry at the time: After he had confronted his officials, Manmohan Singh took the burden entirely on himself, he just didn't get into the blame game.

Shankar Acharya, who joined the ministry shortly afterwards, recalls that Singh was not shy of taking tough decisions. He remembers Singh telling him once that being loud should not be mistaken for being tough, and that you can be firm without being loud.

He demonstrated this at a Fund-Bank meeting at Madrid in 1994, when the G-7 was pushing through a proposal on special drawing rights that would have hurt the interests of the poor countries. It was Singh who resisted in his gentle but firm way, and became the focal point of the developing countries' resistance.

He eventually carried the day. Acharya also argues that Singh is not afraid of taking risks, as he did repeatedly by slashing customs duties under the reform programme, despite the risk of revenues falling short.

Others recall that Singh's extreme humility was occasionally embarrassing. Guests at a Delhi dinner that he threw for the visiting IMF managing director, Michael Camdessus, cringed when Singh kept addressing Camdessus as "Sir" -- something that an official recalls Singh did in a meeting in Washington with the then treasury secretary, Lloyd Bentson. "It could be just a mannerism, but it can be embarrassing," was the comment.

Among his other speech mannerisms is the tendency to use fill words, like "I think", between phrases. As Ashok V. Desai wrote once in Business Standard, "Manmohan Singh should stop saying "I think"; everyone knows that he thinks."

At the end of the day, even as people recount the various anecdotes that stand out in their memory of the man, the one thing that stands out even more is the universal regard and respect in which he is held by anyone who has interacted with him.

In the Delhi jungle, that is a unique achievement. And it must be one reason why he is now going to be the prime minister.

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