Geography Reference
In-Depth Information
experts, colleagues and friends who had worked with him for decades. The approach was
set by Isher Ahluwalia, head of ICRIER, a leading economic policy institute and joint-ed-
itor of the topic, who made the important point that India had been taking strong economic
growth for granted. She implied that the government had been sitting back and failing to
take the steps needed to sustain that growth, which was 'under threat from a deteriorating
macro-economic environment and a downturn in the investment climate'.
Developing this into a potent social issue, she pointed out that Indians born in 1991 were
by then 21, and that half the population was below 25. 'This half of our population started
life in India with 5.5 per cent growth which accelerated slowly and steadily to 8 per cent as
they grew up. They are restive for more, not less.' Sharpening the criticism, she pointed to
the 'unsustainability' of fiscal policies, incomplete financial sector reforms, infrastructure
construction and regulatory frameworks, plus 'macro-economic management in an uncer-
tain international economic environment' and 'challenges of overall governance'. By this
point, the prime minister must have wondered why he had, reluctantly I was told, agreed
to attend the event. Ahluwalia was not only a leading economist, but also a family friend
along with her husband, Montek Singh Ahluwalia.
Raghuram Rajan went further. After saying how 1991 had changed India for the better,
he warned of a 'paralysis in growth-enhancing reforms' that had been papered over by the
high growth. This had made India 'dependent on short-term foreign inflows to a danger-
ously high extent, at a time that the international investor is increasingly sceptical about the
India story'. By the early 2000s, he said, India had needed a second generation of reforms
that included higher education, public sector industries, and allocation of resources such
as land and telecoms spectrum. 'But powerful elements of the political class, which had
never been fully convinced about giving up rents from the Licence Raj in the first place,
had by then formed an unholy coalition with aggressive business people, whom I will refer
to simply as the connected'. That led to 'coalition dharma - a coalition of the bad', which
replaced the pre-1991 Licence Raj with a Resource Raj and led to 'massive fortunes gener-
ated by the connected and by politicians'.
Duvvuri Subbarao, then the governor of the RBI and previously economic adviser to the
prime minister, warned that 1991's 'twin deficits' were back again. The fiscal deficit was 7
per cent in 1991 and was now rising at 5.9 per cent while the current account deficit at 3.6
per cent was higher than the 1991 figure and short-term debt at 23.3 per cent of GDP was
now far above the 10.2 per cent it was in 1991. T.N. Ninan, who runs the
Business Stand-
ard
, then mocked (without naming them) the way that Manmohan Singh had allowed Sonia
Gandhi to dominate policy, saying, 'We have copied the Communists, for whom the party
is supreme and the government secondary.' The prime minister, he said, was also hampered
by 'presidential-style chief ministers in the states' and coalition cabinet ministers who ran
their own policies.
