Remembering 1966 B.R. Shenoy Report on Sri Lanka : An instance of missed opportunity for Sri Lanka?

Each time Sri Lanka goes into a crisis, we need to remember the profound insights of Indian economist BR Shenoy. Perhaps if his policy suggestions were accepted by the Sri Lankan government in 1966, Sri Lanka could have avoided future crisis. But this is a big if and perhaps.

Sri Lanka was going through a crisis in the 1960s. The Government of Sri Lanka appointed Shenoy to study and suggest economic policy going forward.  Shenoy submitted a report outlining many suggestions which were quite amazing and futuristic.

In this article, W.A Wijewardena, a former Deputy governor of the Central Bank of Sri Lanka takes us through the background of SL crisis in 1960s and what led the Government to appoint Shenoy:

Shenoy was engaged in 1966 by J.R Jayewardene, then the Minister of State and Deputy Prime Minister and later President of Sri Lanka, when the economic crisis faced by the country had escalated to a critical level. According to K.M de Silva and Howard Wriggins, biographers of J. R Jayewardene of Sri Lanka, JR had looked for “an economist or economists who could come up with some fresh ideas on how to deal with the malaise in Sri Lanka’s economy”. JR, say his biographers, did not trust academics at Sri Lankan universities because they were Marxists or advocates of policies that promoted state expansion as the way out for Sri Lanka. Such state expansion has been the root cause of the economic malaise so it was quite natural for JR to look for someone who was free from such ‘state-worshipping ideologies’. 

Shenoy’s suggestions were wide ranging from floating the currency to listing public sector firms in the stock exchange Read the article or the report for more details.

Why were the suggestions not accepted?

Shenoy’s recommendations were well ahead of their time and similar to the reform package adopted by Singapore. According to the biographers, JR was impressed by the policy reform package suggested by Shenoy. 

However, when it was submitted to the Cabinet, Prime Minister Dudley Senanayake is reported to become nervous thinking that it is a ploy by JR to oust him from leadership, according to the biographers. Hence, the policy package was dismissed and it remained a dusty document with JR till it was transferred to the J.R. Jayewardene Centre in Colombo as a vital document.    

It is therefore another instance of Sri Lanka missing an opportunity to reform the economy and set it on a firm recovery road. Strangely, Sri Lanka’s economy today is mostly afflicted by the same maladies and Shenoy recommendations could be adopted without any amendment.

This was not the first time that Shenoy’s warnings was ignored. He had famously dissented against the Second Five Year Plan and continued to write against planning in India.