Wanted a dream team of Indian economy managers..

A K Bhattacharya (AK) of Business Standard writes a nice article.

He says India needs a dream team to usher new wave of economic reforms. He goes back to 1991 when the then FM Manmohan Singh took bold reforms:

Manmohan Singh’s success in reforming the economy with a slew of measures in 1991 was possible for three reasons.

  • One, his commitment to the idea of reforms and his ability to empathise with a political system that could withstand only a slow and steady pace of change.
  • Two, he had the unqualified backing of then prime minister P V Narasimha Rao while bringing about the major changes, though with some compromises.
  • And three, he had a team of top-class civil servants in the finance ministry, and even in other economic ministries, who were not only competent, but were ideologically in complete agreement with the need for reforms.

AK says the first two factors are still present today. Manmohan is PM now and understands reforms, so both factor present. Moreover, he has some more ministers backing him for reforms. In 1991 there were just 2 and a half ministers favoring reforms- Manmohan Singh, P Chidambaram and the half remaining unknown till date.

What is questionable is the third part- quality of bureaucracy this time:

However, as 1991 showed it so clearly, the presence of more reform-minded ministers is not the only necessary element to ensure the success of reforms. What is equally critical for giving the economy a big reforms push is to have in place a team of able, enterprising and reform-minded top bureaucrats in charge of key ministries at the Centre. The finance ministry under Singh had the good fortune of having several senior and even middle-rung officers, who made all the difference.

Montek Singh Ahluwalia, Shankar N Acharya, Ashok V Desai (though for a short period), K P Geethakrishnan and M R Sivaraman were there to give shape to the idea of early economic reforms initiated by Manmohan Singh. At a step or two below, there were R Venugopal Reddy, N K Singh and Duvvuri Subbarao. Reddy later moved to the commerce ministry before joining the Reserve Bank of India (RBI) as deputy governor and then, after a short stint at the International Monetary Fund, became the head of the central bank. Singh later became the revenue secretary. Subbarao became the finance secretary and is now the RBI governor. Manmohan Singh’s personal secretary at the time, Rahul Khullar, is now around and heads the commerce ministry.

He says the key economic reformers in i n 1991 are still the ones calling the shots now:

The point is that most officials who made a difference then by making a success of reforms have proved to be durable assets over the last two decades in different capacities and under different governments. They are still the ones who make their contributions to better governance through either being part of the government or from outside. That is proof of how good the team of reforms Manmohan Singh had put together in the 1990s.

The big challenge that Singh faces today is whether he can put together a similarly qualified, competent and committed team of senior officials who can take charge of the situation. That must be a big concern. It is a not just a comment on the quality of officers that the Indian Administrative Services system has been churning out of late, but also on Singh’s own failure in revamping the civil services.

Hmm. Interesting stuff. The article takes me to Brazil paper cited earlier. The paper highlighted the importance of dream team that ushered reforms in Brazil. I asked for a similar paper on India as well. AK kind of gives some flavor to it. It would be very useful to develop these thoughts into a full research paper.

There are a couple of things which need to be added as well:

  • India had no choice then. The reforms were taken after the 1991 BoP crisis. The crisis could easily have been more severe but was somehow managed. So, the reforms were under severe compulsions. This is not to undo the efforts of dream team -91. But without the crisis and dire situation, reforms would have not happened.
  • In 2011 there is no economic crisis barring corruption/scams pointing to governance crisis. With economy growing at 9% plus and India as a major destination for foreign investors, there is no real panic button for reforms. Though this blog sees these governance and corruption issues as bad as a crisis, but that is not how others see things in India. Hence, I do not see much action really.
  • If you look at the top bureaucrats in key ministry portfolios, they still are quite capable people.  So, there should not be much of an issue really in collecting a dream team. It may not be as good as 1991 but still good enough (may be I am compltetely wrong on this one).
  • In 1991, there was lots of uncertainty. In 2011, we know most of the pending issues and need guys who can actually deliver. So, another advantage for 2011.

Overall, there are many advantages in 2011 compared to 1991. Still the pace and willingness to reform is likely to be much lower. A nice paradox really..


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