Three Longs & Three Shorts

How a stellar team of economists transformed India in the 1990s

Often economists are criticised for lacking a practical approach to policy making given the reality of the political economy. But this is a story to the contrary, about how a team of economists were instrumental in transforming the Indian economy from the brink in the 90’s, a decade that saw the rise of coalition politics. Whether it was despite or because of it will be debated elsewhere. This piece is a review of the book “An Economist at Home and Abroad” by Shankar Acharya, the country’s longest serving Chief Economic Advisor, through the decade in question, advising finance ministers Manmohan Singh, P Chidambaram and Yashwant Sinha across three different regimes – a remarkable achievement in itself. Jacob writes “Reading [the book], one cannot help but conclude that The Best and The Brightest is a more apt description of the team that led India’s economic reforms in 1991. Manmohan Singh, Montek Singh Ahluwalia, Bimal Jalan, C. Rangarajan, Y.V. Reddy and Acharya are the most capable economic administrators India has had.”
Whilst Jacob ends up being critical of the current policy regime, his references to Acharya’s ‘personal journey’ in this piece may prompt you to put Acharya’s book in your Amazon cart.
“Ability aside, they were unusually close-knit. Soon after Acharya returned to India in 1993 and moved into government housing in Delhi, he and his family were subjected to a gushing leak in their new home. Within minutes, Ahluwalia, then Union finance secretary, had shown up at the Acharyas’ door with tools to fix it—he quickly cut a branch of a frangipani tree to plug the water mains pipe.
The two men had not only worked together at the World Bank but had studied at Oxford at the same time. Acharya’s engagingly candid memoir records that he used Ahluwalia’s notes to study for his economics papers.
The interplay of conviviality, coincidence and circumstance is one of the many charms of this book. If we can blame the British for the debilitating Indian variant of Fabian socialism of the 1940s and 1950s and the depredations of colonial rule, we must also acknowledge that Manmohan Singh, Ahluwalia and Acharya all studied at Oxford and played a pivotal role in unshackling the economy. Singh’s PhD thesis at Oxford presciently argued against the export pessimism in India and other parts of the developing world.
 Acharya has the distinction of being both the longest- serving CEA and one who served three governments. Acharya, Ahluwalia and others, such as Vijay Kelkar and Rakesh Mohan, provided much needed continuity and coherence to economic reforms for more than a decade. Of Manmohan Singh, he writes, he “was often more knowledgeable on a subject than the senior officer briefing him…both within India and abroad, he was the epitome of dignity, high seriousness and soft-spoken wisdom”.
He is equally complimentary about the Atal Bihari Vajpayee government and Yashwant Sinha, arguing that the removal of import restrictions on consumer goods, phasing out of reservations for small-scale manufacturers, pushing through of important changes to interest rate structures and bold championing of genuine privatisation (instead of the more typical sleight of hand selling of public sector shares to another public sector entity) added up in many ways to an achievement almost as remarkable as that of the Rao-Singh reform push. Labour reforms were readied in the early 1990s but the difficulties of managing coalitions meant they never saw the light of day.
 In the 1990s, fate created a stellar team just when India needed it most. These men navigated the complexities of coalition politics and turned around a balance of payments crisis to transform the sick man of Asia into an Olympian that could compete in global markets in some industries—all without the shock therapy often used in the developing world and in Russia. It remains a phenomenal achievement.”