1991 and 2014 – Inflexion Points in Indian Economy
A disclaimer to begin with is
that whatever analogies given below are meant to effectively convey a point and
have no negative or insulting or other undertones.
Talking of the Indian economy
and its underbelly I had written two blogs that can offer a foundation to my
thoughts and the links are given below.
It is often said that you must
never wrestle with a pig. It is you who
gets dirty and the pig enjoys it.
Likewise here the government, the systems, the existing order, the
polity, the administration, the establishment as it is called is to me the pig.
We the citizens grapple with it and they enjoy it, we get dirty. Soon status
quo is established and we citizens adjust to the new normal – being dirty,
hungry, deprived, handcuffed is perfectly OK. We don’t think that anything
otherwise is better. Our status quo turns into inertia and it requires great
force to bring about change in every manner possible.
From 1947 onwards a few
generations of Indian society were fed on the fear of the foreign invader, the
tremendous sacrifices made to achieve freedom, how a business oriented east
India company conquered India and so on.
Assuming that 70 years is the
age till which a person/generation wields influence on the mind and body of a
nation, a 20 year old in 1947 did so till 1997 with reducing impact. A 20 year
old in 1991 was born in 1971 AFTER the Indo Pak war, and 24 years after
independence. Assuming again that those in their 50’s wield maximum influence
owing to position, age, experience the 50 year old in 1991 was born in 1941 and
would have little understanding of what freedom and independence meant. By 1991
he was part of the crowd whether in establishment or as a citizen and had
learnt to co-habit with the pig and hence was comfortable with the filth and
dirt.
PV Narasimha Rao aided by
Manmohan Singh in 1991 whether by conviction, design or compulsion &
default realised that the time had come to face the truth. The pig was dirty,
we the people were living in a pig sty and the system needed to be cleaned,
hosed down and swept clean. The duo wielded the scalpel with telling effect and
this blog written in 2000 explains the situation to telling effect. As one
reads it, all you need to do is that change the dates, names and you will think
this is 2017.
Another blog that must be read
is below that again looks eerily similar to whatever maybe happening right now.
Different political and
economic leaders take different decisions to wield the scalpel with a major
surgery coupled with a number of other measures to cure a patient. The surgery
is only one of the actions and the most painful but it speeds up the recovery.
PVNR and MMS in 1991 devalued the rupee drastically.
Indira Gandhi in 1966 devalued
the rupee by 36.5 % to literally bail out the sinking Indian economy. In 1991
the PVNR/MMS dup devalued the rupee by 20% and as a Congress leader states,
PVNR did not have the conviction or courage politically to implement the
devaluation but yet it happened. Read more here.
If the devaluation of the
rupee was the surgery done in 1991, demonetisation was the surgery done in
2016. The only difference is that there will be no doubt in history as to who
was responsible and 25 years from now in 2041 nobody will even debate it. Only
one man – Modi – will be hailed or hunted for the after effects.
In 1991 many a businessman who
was so comfortable with the pig and the dirt that they protested the economic
changes, the liberalisation though now they speak a different language after having been dragged out of the pig sty
literally by the PVNR/MMS duo.
The blog below very
effectively conveys the mood at that time in 1991 and I find parallels today
though differently and less painfully.
I have used a number of graphs
from this blog below (with due thanks even if I have not sought official
permission, for which I hope they will forgive me since there is no commercial
intent here) to make my point, but those wishing to read the information and
much more in its original context can do so below.
Now the pigs in the sty in
1991 were overweight, bloated, lazy, impervious to the changing world and if I
take 20 to 25 as the aspirational age of a generation, then this generation in
1991 was born in 1966 - 1971 much after independence, much after the
China/Pakistan war, too young to even understand the 1971 war and a generation
that learnt that India had beaten BOTH England and West Indies at Cricket.
Getting this obese pig to even
move let alone get up in 1991 wasn’t easy, but PVNR/MMS kicked, cajoled, hosed
down with water jets and you had more dirt flying around but the pig moved,
started to stand up. It would be long time before it could walk and run. The
common man did not exactly feel excited, infact as an aspirational generation
aged 30 I remember the trepidation, the fear of the unknown, the terror of the
changes etc. But the important thing was that PVNR/MMS had hosed down the pig
so hard that come what may the status quo was disturbed and a new normal had to
be achieved. Trying to reverse the process wasn’t an option – it was like the
tooth paste had come out. You cannot put it back into the tube. The ONLY option
was to squeeze the toothpaste out hoping you would buy a new tube later.
The actions of the PVNR/MMS
duo included deep dive economics, item numbers, thrilling action scenes that
attracted whistles – a perfect storm. It left whole generations bewildered and
grappling with the dark unknown future. Not being used to the item numbers and action stunts, it left many excited like a teenager high on
testosterone without knowing why. There was no visible light at the end of this tunnel – only that
PVNR/MMS told us there was. But did they even say it in reality? Both PVNR/MMS
were quiet, understated, communicated little and there was no social media for
citizens to engage themselves in the process. What was the result? PVNR/MMS lost the 1996 elections badly but
thanks to at least some parts of the pig looking clean, the mandates were
fractured. However the testosterone kept
many excited about this unknown.
Between 1996 and 1998 we had 3
Prime Ministers in Deve Gowda, Gujral and Vajpayee. Whether they had conviction
or not, they had no choice but to keep hosing the pig down which to their
credit, they did. Finally, by 1998 the impact of the 1991 reforms had begun to
show. You could see larger areas of the pig clean. So, the ABV govt did what
has always been their fundamental DNA – a bit of nationalistic muscle flexing
by way of the nuclear tests which attracted opprobrium globally but again
thanks to either vision or the perfect storm, the Y2K threat loomed largely
across the global horizon. Countries did
not like it, but they urgently, desperately needed humungous numbers of labour
who were educated, knew English and could work/live in uncertain circumstances.
Who else but India and Indians who could fit this bill. So, every economic
indicator took off.
The ABV govt to its credit
sensed the opportunity and after the nuclear tests they needed a life line and
once again they dug deeper into the economic realm with infrastructure like
road building etc. The ABV govt did a
Himalayan blunder - they did not come up with a single item number or thrilling
James Bond stunt. Thanks to the Y2K boom, the economy took off on a rocket
trajectory, the infrastructure initiatives started showing result but with no
visible effort seen as being attributable to the ABV government. The growth and progress got attributed to the
global Y2K opportunity and the new age sunrise industries like Infosys, TCS,
Wipro who were seen as people that became successful inspite of the government
and not because of it. ABV and company tried to ride on this with their India
Shining campaign and failed miserably.
They failed colossally in communicating the work done by them to the citizens
though everyone who understands economics knows the positive work done of them.
Congress learnt from this
failure. They learnt this from their own failure in 1996 and being kept out of
government for 8 years. They learnt the hardest lesson a political party that
thinks that power and Prime Ministership is their birthright can learn. They
realised that the citizens wanted item numbers and thrilling stunts
periodically – never mind that the story, script, acting, screenplay and music
was shoddy. Another political casualty was Chandrababu Naidu who ushered in
huge reforms, infra development, corporate style governance who lost miserably
as the Chief Minister of Andhra Pradesh – again thanks to no item number and
thrilling stunts economically.
To buttress my argument on the
1991 to 1998 to 2004 periods, let us look at various economic indicators and
how they have changed.
GDP is one indicator of
development and progress. 1991 to 1998 was a period of little growth, but
growth there was, the pig started to move. 1998 to 2004 the pig ambled and
shook itself spraying dirt around it. By 2004 it was clean and walking and even
ready to run. The 2004 to 2009 saw huge
growth thanks to PVNR/MMS for kicking the pig out of its stupor and hosing it
down. Thanks to the subsequent PM’s and finally to ABV for cleaning up the pig
sty so that not just the pig, even the pigsty looked clean.
Few understand the concept of
real GDP growth but here again after a steep fall post 1991, it grew
exponentially till 1998, fell after the nuclear test and yo-yo’d thanks to the
deep dive initiatives on infrastructure and again reached take off trajectory
by 2003. Only that SG/MMS boarded this rocket.
Globally people did not know
India, Indians except as immigrants. The nuclear tests, the ability to sustain
it and yet progress technologically in that field, the huge growth in space
technology and the experience of dealing with India as a business partner in
Y2K, the opinion and impressions of the global community about India changed
and the period of 2004 to 2009 saw huge growth in FDI.
The per capita income again is
no different. It is only in 2004 that it took off. So while every single economic indices boomed
post 2004, it would be a travesty of justice to attribute this to the SG govt.
Yes the man at the helm MMS deserved the credit for being an effective planner
and the guardian from the 1991 reforms but the real risk politically was taken
by PVNR and later ABV – and both lost, badly. MMS did not lose anything, took
no risks but as a family retainer only got rewarded. This has nothing to do
with his economic intelligence or political acumen or ability to take risks.
This infact shows up the blinkered
vision or lack of it of not just the SG/MMS govt but every single previous
government. Agriculture that attracts the maximum attention politically, is
harnessed for votes by its suicides, is supposed to be the mainstay of the Indian
economy (still called agrarian), is kept alive by frequent loan waivers and high decibel speeches by polity, administration, liberals, communists, nationalists BUT zero effort made to lift this segment of the economy which has declined steadily year
after year after year. It is now dredging the bottom. Nobody wants to touch this sector to bring about reforms like in 1991 which affected industry - without growth, but ended up creating a new sector - services
Industry for all the hoopla
about a Ambani and Adani to Bajaj and Birla to a Tata and Mittal has little to
show for itself. Its virtually been stagnant from 1991 to 2013 where there was
a brief spurt before going back to sleep.
When you consider that for
Agriculture to become economically strong and viable, it needs economies of scale,
mechanisation, modernisation, crop insurance, and all this means – surplus
labour that needs to be absorbed somewhere. Ideally this should have been
industry with workers and organised labour force. The Indian for a host of reasons from
centuries has always been entrepreneurial and this can be borne by the fact
that globally you will see evidence of Indian trading. Thus, for all the
efforts by successive governments, the informal labour without access to social
security or any such safety net continues to remain very high. 82.7% of the
workforce is in the unorganised sector of the economy. However much the efforts
of govt, business, the organised labour force has been low. That is why even
today inspite of the so called huge unemployment, industries look towards
automation though there are other imperative too. To me personally India suffers from under
employment than unemployment.
Services are now beginning to
go down, global competition growing, protectionism is increasing, the threat of
terror is creating artificial mental barriers to movement, cross country
collaborations and globalisation. This will and likely to remain this way for
some more time. However much the liberal may shout in public, in private they
remain as protectionist as the nationalist. So, what has this to say about the
state of the Indian economy?
The SG/MMS government having learnt from the
experiences of the past, focussed on what I call as item numbers and action
stunts as the focus of the economy. The economy was anyway running on auto
pilot having taken off by 2004 and reached cruising altitude. The people no
longer remembered the old dirty pig and its pig sty. A brand new pig was
installed in a new pigsty that had air conditioning, running water and a food
court. The citizens had now grown accustomed to this new normal. They were
settling down with the new pig and the pig now in air conditioned comfort went
back to eating, burping and what do you know – you do expel what you eat.
The government came up with
Food security, RTI, MNREGA, RTE, Land acquisition and such other measures that
meant you spent money, made the citizens think they earned that money,
convinced the populace that having full rights to information, education and
food meant that they could eat thrice a day, study or not study where they
desire and be privy to the innermost secrets of the country. It was non stop
item numbers and each action stunt bettered by the next. James Bond and Sheila
ki Jawaani were on a roll till Munni Badnaam hui and by 2012 the SG/MMS govt
woke up to realise that the auto pilot had gone to sleep too. The fuel was
almost over, the plane was now heading down to the ground. The tree that
PVNR/MMS planted in 1991, that was watered and protected by ABV with a fence
was now drying up. The pig had once again become obese, this time rather fast, thanks
to the food court and the air conditioned comfort. The excrement of the pig had
piled up and the stink was all pervading. There was nobody to clean up the
mess. You see nobody thought a clean pig that incessantly eats will not expel
it.
This stink brought the NM govt
into power in 2014. They found themselves at a new height, nosediving and a
repeat of 1991 in a sense. The government had no choice but to again wield the stick,
kick the pig to get up and move, hose down the place with water. The citizenry
now accustomed to the new normal of a clean pig and its excrement again find
themselves getting hosed down and the filth is now again flying round.
The new team of NM/AJ is once
again repairing the economy mid-air, attempting to do mid-air refuelling, the
passengers are not being given drinks, the music system is silent, some of the
passengers have started playing antakshari giving the rest of us a head ache. Every
action of the NM/AJ duo to refuel the plane is causing turbulence and
discomfort and the only confirmed information available is that the Captain is
communicating with clarity and confidence that he is completely in control and
soon the aircraft will stabilise and land safely. But……………
the captain has stopped all inflight
service, the passengers want drinks and entertainment but that is not
forthcoming. They have been watching item numbers and action stunts for so long that the eerie quiet is
disquieting.
The question again is – will 2019
be a repeat of 1996 and 2004? Will the absence of thrills to the citizens make
them think that nothing is happening? Will
the pig sty again get cleaned and the pig once again kicked to start running
only to find that when the plane lands in 2019, you have a new crew and they
walk out graciously accepting the accolades of grateful passengers for having been
saved from disaster without doing anything?
It is crucial for this NM/AJ
govt to learn from the past. Very few understand deep dive economics. Just as
food is important but a little bit of pickle gives the kick, this govt must
serve the item numbers and action sequences – and very very fast. Their old, historical
mainstay votebank cannot be frittered away at the altar of developing new
votebanks. Just because they see success with a new votebank does not mean that
it is stable, dependable and assured. For long this NM/AJ duo has successfully played
upon the emotions and aspirations of its foundation in the hope of higher
rewards – none of which are coming or even seen to be coming. There is
restlessness and a sense of anxiety. If once
again as I said before the sensex is a barometer of feelings then things look
optimistic. But whether the NM/AJ duo want to serve the drinks and start the entertainment
programs for the passengers or continue on a wing and prayer that passengers
understand them when landing in 2019 is the million dollar question.
That’s why I said in the
beginning that 1991 and now 2014 are important economic inflexion points in
Indian history. Once again the drooping tree is being rejuvenated and likely to
give fruit in the coming years, a new fence is being built but history will
tell us if those who have now worked will get the rewards or like the wise man
says – Fools build houses for wise men to stay. June 2019 will give the answer.
The below link is a suggested
reading.
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