Clearing the Cobwebs - Implosion: India's Tryst with Reality - page 56

two years of unstable coalition rule between his defeat in a 1989 general election and the
formation of Rao's government.
The reforms really began at the start of the 1980s after Indira Gandhi was returned (in
1980) as prime minister, having recovered politically from a controversial two-year state of
Emergency that she had declared in 1975. She had a new approach on economic policy, as
L.K. Jha, her top adviser and a veteran bureaucrat, used to explain to me, sitting in the study
of his home at the 10 Janpath bungalow in New Delhi where Sonia Gandhi now lives. 2 His
task, he said, was to begin to reverse some of the state controls and protectionist policies
that Indira Gandhi (and he) had introduced and extended in the 1960s and 1970s, building
on the centralist economic doctrine of her father, Jawaharlal Nehru.
It was her initiatives and Jha's work, not the 1991 reforms, that marked the turning point
in the history of India's two phases of development since independence, as Arvind Vir-
mani, a former chief economic adviser to the Indian government, has explained. 3 The 30
years from 1950 to 1980 saw India's version of socialism, which aimed to block imports
and force the purchase of India-made goods (known as import substitution). The freedom
of the private sector to compete was restricted in many industries, and government owner-
ship and controls were extended into as many areas as possible. The second phase, which
started in the early 1980s and was boosted in 1991, still continues. Virmani calls this the
phase of 'market experimentation', in which the oppressive control regime set up during
the first phase was gradually modified and removed. (Many controls however still remain,
enabling companies involved with natural resources, land and infrastructure to impede de-
velopment and encourage corruption.)
One of Indira Gandhi's first initiatives, in February 1982, was to begin to remove con-
trols on the cement industry (in response to a corruption scandal involving the exploitation
of cement shortages by, among others, a leading Congress politician). 4 I was on my first
visit to India at the time, writing articles for a Financial Times country survey on India,
and remember meeting my colleagues, Alain Cass and K.K. Sharma, on the terrace of the
Taj Mahal Hotel in Mumbai. Cass, who was the Asia editor, asked Sharma, then our India
correspondent, if this heralded real change and how we should reflect that in the overall
approach of the survey. Little did we realize the significance of the question.
Gandhi had by this time lost some of her antipathy for the private sector and had also
developed an unexpected enthusiasm for importing foreign technology. Alcatel of France
had just started work on modernizing parts of India's telephone system, which was so an-
tiquated that Plessey of the UK donated two electronic exchanges in 1983 for use by a
Commonwealth heads of government meeting in Goa. 5 (Critics suggested that Gandhi had
been influenced by Dhirubhai Ambani, founder of the rapidly growing Reliance Industries,
who had a close political connection with her government, to swing in favour of the private
sector. The acceptance of foreign technology controversially led to the award of fertiliser