As you all are aware that presently economy is not doing very well as per expectations, and there have been murmur in political/finance sector, and specially so called experts from Congress party that country should go back to reforms of Narsimha Rao- Manmohan Singh combination. But everyone is forgetting that those were different times and present time is different. The people who are talking of adopting Rao Manmohan reforms must know that what was reform then is no longer valid in the present scenario.
In Rao-Manmohan time, the policy was nothing more than 22 conditions given by the International Monetary Fund (IMF), which had to be implemented by the govt for securing loan from IMF. The stark reality of that day was that the govt had only few million $ in their kitty, which then was described as chillar or small change.
The major conditions which were laid down by IMF were
- Bring down the rates of custom duty.
- Bring down the rates excise duty.
- Relax the quantitative restriction (QR), which means minimising the quantitative restrictions on import.
- Relax the imports by opening the licence provisions, which meant at that time was to simply enlarge the scope of Open General Licence (OGL).
- Doing away with state control on new manufacturers, which means abolishing Directorate General of Technical Development (DGTD).
- Doing away with permissions from departments for importing goods.
- Doing away with cost control department.
- Simplifying the duty structure.
- Abolishing of exemptions and such other things.
All these policies were really good, but they were very difficult to implement. The FM Manmohan Singh and his team in those days started meetings with importers and manufacturers, and there were many resistances from the industrialists, importers. To find the solution in these circumstances, which is acceptable to both sides was a difficult task. When steel industry was informed that govt intends to reduce import duty on steel from 75% to 50% to ultimately 25%, they started saying that steel industry will be ruined and finished if you do this. The same thing happened with electronics, ball bearings and other items, where duty was brought down from 250% to 100% to 50%.
They were basically policies for liberalisations, and were policies of IMF and not of Manmohan Singh. Actually the Press at that time attacked him, and said these policies were against his policy of control. What was his answer that time that now he is FM, he could have a different policy, which is of liberalisation.
Now the thing is this, these policies are already implemented in 1991-96 when Rao was PM and Manmohan Singh was FM, how can we implement them once again. The DGTD is not there, the cost control mechanism is not there, and rates of duties are already lower than what World Trade Organisation (WTO) had indicated.
Reforms will always be there but now we might be needing different types of reforms. Reforms can vary with the present situation and time. If you remember once even Control was reform and that was during Indira’s regime. Another time decontrol was reform. Then Public- Private participation became reform. The concept of reform always keep on changing. In my opinion right concept of reform should involve for taking actions which seems to be good at that time.
When Manmohan Singh was FM, what was first action he took after meeting with financial advisors :
- First to remove all budgetary support (both loan and equity) to Public Sector Units (PSUs).
- To gradually reduce the subsidies on food, fertiliser and petroleum products.
- To do away with Inspector Raj.
The process of implementing these, is still going on.
So those who are talking of adopting Rao-Manmohan reform policy must understand that what was reform earlier can not be reform now.
So financial advisors and economists of the present govt have to thing reforms which are different and should suit present scenario and they should help in boosting the economy. Otherwise we are facing a great recession in near future. Secondly whatever reforms are coming, they should be in accordance with need of the hour and that is it should improve the existing infra structure of the country, create more jobs and the prices of essential commodities in affordable range.
Waiting for your feed backs/comments/views.
Anil Malik
Mumbai, India
17th Dec 2019.