To the Brink and Back: India’s 1991 Story (5 page)

I went to Rao’s house directly after taking Manmohan Singh’s leave and informed him about the latter’s positive response and that I had conveyed the assurance that Rao would fully back Manmohan Singh in the discharge of his duties as finance minister. Rao felt very happy that he had succeeded in selecting the right man for this vital post when the country’s financial position was at its nadir.
²¹

Some years later, as I got to know P.C. Alexander better, I asked him what had prompted him to choose Singh so forcefully. He told me that he knew how much confidence
Indira Gandhi had in Singh and that, at heart, Singh was a Congressman in the Nehruvian mould. I never summoned the courage to ask Rao himself about his choice, although one of his closest aides recalls that Rao had suggested Singh’s name to replace him as deputy chairman of the
Planning Commission. (Rao had been minister of planning and deputy chairman of the Planning Commission between November 1984 and mid-January 1985, and had been entrusted with the defence portfolio as well in January 1985.) It is clear that the prime minister had seen his finance minister-designate at the closest of quarters for almost a decade-and-a-half.

R. Venkataraman—or RV, as he was popularly known—who was president of India through the crucial months of 1991, further confirms this:

Narasimha Rao called on me at 7.30 p.m. [on 20 June] and I offered him my warmest congratulations […] Narasimha Rao wanted my suggestion for the post of Finance Minister in view of the acute foreign exchange crisis facing the country. He said that he would prefer one with some knowledge of the international financial institutions and experience in dealing with them. I told him that in that case he would have to go outside the ranks of his party and suggested two eminent names. The Prime Minister later chose Dr. Manmohan Singh with whose excellent work in the South Commission he was familiar.
²²

Would
Rajiv Gandhi have appointed Manmohan Singh as his finance minister had he come back as prime minister? Of course, this question cannot be answered definitively but can only be speculated upon. However,
R.D. Pradhan has stated this possibility in his remembrances:

By mid-May 1991 […] RG [Rajiv Gandhi] had sensed that he would be back in power. He had asked me to start making the necessary preparations in case he had to assume responsibility. I came up with a seven-page document which
Sam Pitroda had transferred onto his laptop.

Given the grave financial situation faced by India then, we knew that the first priority would be the appointment as finance minister of a highly qualified economist with a sound knowledge of financial management and one who commanded the trust of the [IMF] and the World Bank. RG had tentatively cleared three names:
Dr. I.G. Patel, Dr. Manmohan Singh (both former governors of the Reserve Bank of India) and
S. Venkitaramanan (then the RBI governor).
Sam Pitroda and I knew Dr. Patel very well as a result of previous interactions with him. IG, who was earlier director of the London School of Economics, turned down the offer. Dr. Manmohan Singh was at that time out of India in connection with the work of the South-South Commission presided over by the former chancellor of the Federal Republic of Germany, Willy Brandt [
sic
].

RG had asked me to visit Bombay and to contact Dr. Manmohan Singh through S. Venkitaramanan […]

On 20 June 1991, as soon as it became clear that PV [Narasimha Rao] would become the next Prime Minister I briefed him on a range of important matters that we were dealing with prior to RG’s death. I particularly pointed out that RG had cleared the name of Dr. Manmohan Singh as the next Union Finance Minister in case Dr. I.G. Patel was not available.
²³

Rajiv Gandhi’s esteem for Singh also comes through in
Mani Shankar Aiyar’s comments. Aiyar was amongst the closest of
Rajiv Gandhi’s aides even in the years after the latter had ceased to be prime minister. He had quit the Indian Foreign Service (IFS) in 1989 and became officer-on-special-duty to the Congress president in early 1990. When I asked him to recall the 1991 period, this is what he wrote to me very colourfully on 3 June 2015:

In February 1991, I called on the Chief Economic Adviser,
Dr. Deepak Nayyar to collect some reference material for my Sunday columns. He gave me the material readily enough but pressed me to stay so that he could inform me of the condition of the economy. For the next thirty minutes, Dr. Nayyar sent the shivers down my spine [as he explained] how India was on the verge of bankruptcy. I rushed from North Block to 10 Janpath and, on learning that Rajiv Gandhi was about to commence a
CWC meeting, got George’s [Rajiv Gandhi’s private secretary] permission to barge through the door. I requested Rajivji to come to one side as I had important information to impart to him. He seemed amused rather than bemused and, after hearing me out for a few minutes, asked why I did not address the whole of the CWC rather than just himself. Accordingly I did so. Rajivji asked me not to go away but wait with George till the CWC meeting is over. When I returned to the room, he beamed as usual and informed me that none of the CWC members had understood a word of what I had said! He then instructed me to call on Dr. Manmohan Singh and ask him to meet Rajivji as soon as possible.

I went to Dr. Manmohan Singh’s Pandara Road residence where Mrs.
Gursharan Kaur met me at the verandah to say that her husband was not at all well and could I come back later? I said I did not really need to converse with him but only convey a message of a couple of sentences which was a matter of urgent importance. She kindly let me into Dr. Singh’s bedroom where I succinctly gave my message and leant my ear towards Dr. Singh’s mouth to hear him whisper that I should tell Rajivji that he would meet him as soon as possible.

Clearly, Manmohan Singh as finance minister was ‘an idea whose time had come’, to adopt a famous phrase by Victor Hugo—a phrase to be used by Singh himself in his maiden
budget speech on 24 July 1991.

Singh’s sobriety and quiet dignity were his hallmarks, just as his experience as an economic administrator was unmatched. There had been noted ‘professionals’ as finance ministers before, like
Shanmukham Chetty,
John Mathai and
C.D. Deshmukh. But none matched the combination of academic brilliance and wide administrative experience of Manmohan Singh.

However inevitable and inspired his appointment may appear in retrospect, the fact remains that it was a surprise to almost everybody.
Pranab Mukherjee, who had been finance minister between 1982 and 1984 in the
Indira Gandhi government, was widely considered to be the favourite for this coveted post. After he had re-joined the Congress (after founding another party in 1986, the
Rashtriya Samajwadi Congress in West Bengal), for all of 1990 and early 1991, he had been advising Rajiv Gandhi and had been his interlocutor with
Yashwant Sinha (who was finance minister in
Chandra Shekhar’s government). On 20 June 1991, just a day before Rao’s swearing-in as prime minister, Pranabda—as he was popularly called—gave a detailed interview to the journalist
R.K. Roy (to be carried the next day in
The Times of India
) in which he had pretty much laid out the broad economic agenda of the Rao government (Annexure 3).

Q: The Congress wants to roll back prices. What is the targeted rate of price rise the party has in mind?

A: Inflation cannot be zeroed but it can certainly be brought down from the current double-digit rate to 8 per cent or even lower, that was the average in the eighties. I would start with this kind of a modest target. As regards rolling back prices, the government has some fiscal manoeuvrability in this regard, as also administrative measures available to it. I would not like to amplify upon this now. […]

Q: You are talking about resuming the plan but the IMF wants economic liberalisation.

A: We want planning and liberalisation. We must give room for play to the private sector. The public sector must vacate the areas in which the private sector has the capability to come in. The public sector must move into the difficult areas of advanced technology.

Q: You are not averse to conditional assistance from the IMF?

A: No. Actually, the government [of
V.P. Singh] ought to have taken advance action in 1990. The conditionality would have been less harsh.

Q: But surely the Congress government could have gone to the IMF in early 1989?

A: You see, in 1989 the mix between short-term borrowing and the lines of long-term credits available to this country was fair. The proportion of short-term credit rose in 1990, before the Gulf War. If the Congress had been returned to power, we would have gone to the IMF in 1990.

However, Pranabda’s appointment as finance minister was not to be. Instead, on the evening of 22 June 1991, the prime minister told me that he was soon going to appoint Pranab Mukherjee as deputy chairman of the
Planning Commission and that I should keep in close touch with him. This appointment was made the very next day and when I called on him, the new deputy chairman told me that I should keep meeting him regularly to discuss both economic and political matters. He also told me that I should continue to work as an aide to the prime minister, and he had earlier conveyed this to ‘PV’—as he used to refer to Narasimha Rao at all times.

This repeated reference to ‘PV’ always reminded me of high-school chemistry where students are taught Boyle’s law, which is mathematically represented as PV=constant, where P is the pressure of a given quantity of gas and V is its volume. The political ‘PV’, similarly, was unflappable.

²¹
P.C. Alexander,
Through the Corridors of Power
(New Delhi: HarperCollins, 2004).

²²
R. Venkataraman,
My Presidential Years
(New Delhi: HarperCollins, 1994). Manmohan Singh had been secretary general of the South Commission in Geneva between 1987 and late 1990.

²³
R.D. Pradhan,
My Years with Rajiv and Sonia
(New Delhi: Hay House, 2014). Actually the name of the commission that Pradhan refers to was the South Commission which was chaired by Dr Julius Nyerere, former president of Tanzania.

anmohan Singh was officially given the finance portfolio on 22 June 1991. Three days later he held his first formal press conference. It was a virtuoso performance where he laid out the
government’s priorities in economic policy in the clearest manner possible. On one issue though, what he said created a storm.