To the Brink and Back: India’s 1991 Story (10 page)

Shri
A.G. Kulkarni (Maharashtra; INC [Indian National Congress]): This is not proper. Comrade Bhupesh Gupta used to say, “Why don’t you go to Russia and China and see what is happening?” (
Interruptions
)

Mr. Chairman: He says something else. Please sit down.

Shri A.G. Kulkarni: No. How do you allow him?

Mr. Chairman: I allowed him. Now you please sit down. (
Interruptions
) I will explain to you. (
Interruptions
)

Shri Dipen Ghosh: How could it find its way into the parliamentary papers? This is unauthorised use of the Parliamentary Secretariat surreptitiously for sending the papers to the Members of Parliament. (
Interruptions
) I [take] exception to this unauthorised use of Parliamentary Secretariat Office for circulating a particular point of view about the Indian economic situation for finding solutions. If it is for enlightening the Members, there are 35 other economists who have also issued statements, who have also issued a call and whose views should also have been circulated. (
Interruptions
)

Mr. Chairman: It is all right. Now, please listen. (
Interruptions
)

Smt.
Renuka Chowdhury (Andhra Pradesh; TDP): This is total erosion of the Indian Parliamentary system. (
Interruptions
)

Mr. Chairman: Everybody has understood. I have already told you here and I am repeating it: it was a mistake on the part of the Secretariat to do it. It was not correct. That is all. (
Interruptions
)
Shri
Dipen Ghosh: You should make an enquiry as to who is responsible. (
Interruptions
)

Mr. Chairman: No paper like this should be circulated and I hope that the Secretariat will keep it in view that no unauthorised paper is circulated to Members in any way at any time. (
Interruptions
) […]

Shri Yashwant Sinha (Bihar; SJP): May I make one point […] We are completely reassured by what [was] said, that extraneous papers should not have found a place in the parliamentary papers which were circulated. But I think the point which has been raised is a very important one. (
Interruptions
)

Mr. Chairman: I agree. (
Interruptions
)

Shri Yashwant Sinha: We must decide and we must know under whose influence, under what inspiration those papers were circulated and what circumstances. The House must be taken into confidence. (
Interruptions
)

Shri Dipen Ghosh: We want to know. (
Interruptions
) The Finance Minister must explain. (
Interruptions
)

Shri Yashwant Sinha: It was done in a casual manner. This is a very serious thing. We want to know who was behind this. (
Interruptions
)

Mr. Chairman: The Secretariat has informed me just now there was a letter from the Parliament Assistant of the Finance Minister in which it is stated: ‘250 copies of English and 100 copies of Hindi version of Joint Statement:
Agenda for Economic Reform are sent herewith. Finance Minister desires that the same are circulated among the Members of the Rajya Sabha today positively.’ […]

Shri Yashwant Sinha: Shall we leave it at that?

Mr. Chairman: Of course.

Shri Yashwant Sinha: The Finance Minister must appear in this House. He must explain [why] he wanted that that particular paper be circulated.

Shri Dipen Ghosh: The Leader of the House [should] be asked to explain. He owes an explanation to this House.

The Leader of the House (Shri S.B. Chavan): I will inquire into the matter. I will find out from the Honourable Minister of Finance as to why it is that he thought it necessary that this should have been circulated.

Shri Jagdish Prasad Mathur (Uttar Pradesh; BJP): This shows the ignorance of the Finance Minister about the procedures. That is all.

Hectic back-channel negotiations then commenced with the minister of Parliamentary affairs,
Ghulam Nabi Azad, playing a key role in settling the controversy. Finally, on 15 July, at the stroke of the noon hour, the chairman of the Rajya Sabha made the following announcement:

On 11
^th
July, 1991, several Members raised in the House a matter regarding circulation of a statement purporting to have been signed by Prof. P.N. Dhar, Shri
I.G. Patel, Shri Narasimham, Shri
R. N. Malhotra along with parliamentary papers. They also observed that the circulation of such an unauthorised paper was not correct. The Home Minister who is also Leader of the House, assured in the House that he would enquire into the matter. I have now received a letter from the Finance Minister, Shri Manmohan Singh, which reads as follows:

Respected Chairman, may I request you to recall the proceedings of the Rajya Sabha on 11
^th
July 1991 regarding the circulation of joint statement issued by Prof P.N. Dhar, Dr. I.G. Patel,
Shri M. Narasimham and Shri R. N. Malhotra on
Agenda for Economic Reform. I wish to express my sincere apologies for the unintended lapse in strict adherence to the procedure for circulation of such papers. I have taken note of the points raised by the Hon. Members as well as the ruling given by you on the subject, and I would like to assure you that the prescribed procedure will be strictly followed in the future.

In view of the above, I treat the matter as closed.

I called on the finance minister that very evening, and his relief that the
joint statement controversy had been resolved was all-too-evident. But neither of us had bargained for yet another eruption, this time in the Lok Sabha the very next day.

Sometime after noon on 16 July, the speaker of the Lok Sabha made this statement: ‘I have received a letter from the Hon. Finance Minister regretting circulation of the views of economists. I think the matter can be closed with that.’ But it was not to be so easily disposed of as the following exchange will reveal:

Shri
Somnath Chatterjee (West Bengal; CPM): What is the letter? (
Interruptions
)

Mr. Speaker: He has regretted. (
Interruptions
)

Mr. Speaker: He has now expressed his regret. (
Interruptions
)

Shri Somnath Chatterjee: Why should they utilise the Lok Sabha Secretariat for this purpose? They should not pressurise the Lok Sabha Secretariat. The Secretariat people are very experienced. The Lok Sabha Secretariat must have been pressurised.

Mr. Speaker: There are two aspects. One aspect relates to the Finance Ministry. The other aspect relates to the legislature Secretariat. As far as the Finance Ministry is concerned, I have received a letter and the matter should rest over there. As far as this Secretariat is concerned, I am personally looking into it for appropriate action. (
Interruptions
)

Shri Somnath Chatterjee: I am not blaming them. I am not blaming the Secretariat. The Secretariat people know their job. That is why I say they must have been pressurised.

Shri
Ram Naik (Maharashtra; BJP): This is being informed to [the] Lok Sabha today. We have seen that [the] Rajya Sabha has been informed yesterday. Sir, both the Houses should be treated on par.

Mr. Speaker: About what?

Shri
Ram Naik: About this incident of expressing the regret by the Finance Minister, the Rajya Sabha was informed yesterday. But this is being announced here today. At least in such matters, both the Houses—Lok Sabha and Rajya Sabha—should be treated on par.

Mr. Speaker: Do not prolong it. I received the letter only in the evening. Maybe that letter [had] been written yesterday only. It came to my notice only in the evening. I am informing you now. It is not necessary that you should prolong it.

This finally set the
controversy to rest. But there had been tension for six days. The intentions were right. But yes, the procedure was certainly unconventional and hackles were justifiably raised. It was a valuable early lesson in how to deal with Parliament.

In retrospect, the mistake we made was not in circulating the other statement mentioned by CPM leader, Dipen Ghosh, when he fired his salvo on 11 July. This was a statement issued by thirty-five of the leading ‘leftist’ economists of the country in the nation’s capital on 8 July (Annexure 6). They included former members of the
Planning Commission like
C.H. Hanumantha Rao,
Arun Ghosh,
Rajni Kothari and
G.S. Bhalla; former West Bengal finance minister,
Ashok Mitra; and noted academics like
I.S. Gulati and
Bhabatosh Datta. This statement was significantly at variance with the one issued by
PND and company in that it rejected the inevitability of approaching the
IMF for short-and medium-term assistance. While its analysis of what had gone wrong in 1990 and 1991 was not radically different from that of the quartet, the thrust of its recommendations was not faster and deeper regulation or an expanded role for the private sector. Rather, it was critical of the devaluation measures and wanted no cut in subsidies.

The significance of this statement was that three top officials serving the government in key positions—the finance secretary, foreign secretary and the chief economic adviser in the Ministry of Finance—were in full sympathy with it and did not hide their support, much to the irritation of the principal secretary to the prime minister and, I suspect, even the finance minister.

⁴⁴
This was incidentally the period when Manmohan Singh first came to the notice of Indira Gandhi and earned a name for himself. The rate of inflation was 20.2 per cent in 1973-74 and 25.2 per cent in 1974-75 on account of the first oil shock and drought. The rate of inflation fell to -1.09 per cent in 1975-76; 2.1 per cent in 1976-77; 5.2 per cent in 1977-78; and actually 0 per cent in 1978-79. There is wide consensus amongst scholars that the package of extraordinarily tough fiscal, monetary and incomes-policy measures announced in July 1974 helped destroy the demon of inflation in the late 1970s. Manmohan Singh was the principal author of the package, which P.N. Dhar and B.D. Pande (then the cabinet secretary) helped sell to a beleaguered prime minister. The three were entrusted with the responsibility of getting the package implemented.

n 4 July 1991, the West Bengal government released a document titled ‘Alternative Policy Approach to Resolve BoP
⁴⁵
Crisis’ (Annexure 7). In it, it called for an increase in income tax rates, cuts in non-development expenditure, the collection of tax arrears and the unearthing of black money. Soon after, the West Bengal chief minister, Jyoti Basu, wrote to the prime minister and finance minister, sending them this document.

After taking over, both the finance minister and the prime minister had called for a national debate. Now they had one. The finance minister promptly responded on 9 July,
⁴⁶
and wrote:

My effort […] is that somehow we should avoid a situation where we are declared a defaulter. If that eventuality comes about despite my efforts, it would be the saddest day in the history of Independent India. Moreover, judging by the experience of Latin American and African countries in the last decade, a default situation will certainly mean that the decade of the 90s will also be a decade of reckless inflation and rising unemployment. It will, TO THE BRINK AND BACK π 61 in other words, become a lost decade as has been the case in Latin American and most countries of Africa during the 1980s.

Referring directly to the recommendations in the note, Manmohan Singh went on to write:

It is my honest assessment that the alternative policy approach does not provide a way out of the balance of payments difficulties at the present juncture. The non-resident Indians will not send any money to India so long as our reserves remain at the dangerously low level that they are now. As regards import compression, you very well may be right that in the previous years there was some fat in the import bill. However, in the last five months a savage import cut has been imposed and today there is no scope for any further import compression. Even the import compression that is now in place will have serious consequences. It will hurt industrial production, lead to large-scale unemployment and will give rise to serious unrest and disruption.