Which Manmohan Singh Will History Remember? A Return to His Early Triumphs

Singh as finance minister in his office in 1995 DELHI PRESS IMAGES
Elections 2024
12 March, 2015

Yesterday, a Special Court summoned Manmohan Singh on accusations of corruption and criminal conspiracy with regard to the allotment of a coal mine in Odisha to Hindalco Industries Ltd. This morning the Indian Express reported that the court found that Singh, when holding the Ministry of Coal portfolio in 2005 to 2009, gave his approval to Hindalco "in violation of established procedure." This is the latest setback for the former prime minister, who has also been accused of impropriety in the 2G case by Vinod Rai, former Comptroller and Auditor General, and others and was examined by the CBI in January this year with regard to the same coal block allocations for which he now faces the court summons.

In our October 2011 issue, Vinod Jose profiled Singh in "Falling Man.” In this excerpt from that story, Singh is called on by then prime minister PV Narasimha Rao to take the reins of the finance ministry, marking the beginning of his steep rise in politics.

Facing an economic catastrophe, PV Narasimha Rao knew he needed to reach beyond the ranks of khadi-clad senior Congress leaders to select a finance minister, for three separate reasons: first, he would need a skilled economist to conduct negotiations with the international financial institutions; second, in the event of a backlash against the radical policy changes, an ‘outsider’ would be easier to dismiss from the cabinet; and third, if the new finance minister was successful, he still wouldn’t pose any threat to Rao’s own position in the party. To some extent, the blueprint for liberalisation had already taken shape, given India’s desperate need for huge loans; what remained to be determined were the details of its execution.

PC Alexander, a close friend of Rao who had been an influential principal secretary to Indira Gandhi, helped with the search. “Alexander would sit with PV, make calls, write names, try combinations, strike them out, and then write again,” recalled the former Union Cabinet minister. After Alexander’s first choice, the former RBI governor IG Patel, declined the offer, he called Manmohan Singh, Patel’s successor at the RBI. Singh was delighted and said he would eagerly accept the job, the former cabinet minister told me, but two days passed without any follow-up from Alexander.

On the morning of 22 June, a Saturday, Singh got a call in his office at the University Grants Commission, where he had been appointed chairman three months earlier. It was Rao, who was scheduled to take his oath as prime minister that afternoon. “PV asked Manmohan, ‘What are you doing there? Go home and change, and come straight to Rashtrapati Bhavan,’” the former cabinet minister said.

Singh was among a handful of cabinet ministers who took their oaths with Rao that Saturday afternoon, and he started the job immediately. “Manmohan started working from home on Saturday and Sunday,” said Mani Shankar Aiyar, who later served as a minister in Singh’s first cabinet. “He was already consulting with other economists and making plans to borrow funds.”

On Monday, his first day in office, Singh held a press conference to announce the scope of the impending reforms; he promised to clear the “cobwebs of unnecessary control” that had impeded economic development and decreed that “the world has changed, and the country must also change”.

The next day, Singh had his first official meeting with Rao, whose commitment to serious reform was still unknown. According to a senior secretary then in the finance ministry, “Manmohan was at sea, and still very nervous.” Singh told the prime minister that the country immediately needed a huge standby loan of at least $5 billion. To manage the current financial year would only require $2 billion, he suggested, but it would be prudent to take a larger loan from the IMF in anticipation of ongoing problems in the following year. “There was no ambiguity in Rao’s mind,” the senior secretary recalled. “He was more convinced than Manmohan Singh.” Rao approved Singh’s proposal on the spot, and the new finance minister returned to his office and immediately drafted a letter to the managing director of the IMF, Michel Camdessus, specifying India’s requirements and promising to undertake the necessary structural reforms in a manner consistent with “India’s social objectives”.

The following month would prove crucial: Singh had to prepare a budget that would pass muster with the IMF and any other international lenders looking for evidence that the commitment to liberalisation was sincere. “During that month of budget preparation, the Cabinet Committee for Political Affairs met almost every day,” the senior secretary told me. “Manmohan was so indecisive and nervous that Rao ended up doing most of the talking and convincing the others himself.”

Singh’s starring role in the 1991 crisis was already enshrined in history by the time the term “Manmohanomics” was coined within a year or two of his first budget. The prime minister has modestly insisted that “no single person could claim credit” for the reforms, but time has steadily effaced the critical part played by Rao, who is today rarely credited with anything more than having selected Singh as his finance minister. “Manmohan was actually a convert, from the old system to the new,” the senior secretary said. “So like every convert, he was unsure, even if he gave the impression that things would all be fine. PV, who was known to be so indecisive—at cabinet committee meetings he couldn’t even decide between tea and coffee—was surprisingly sure that India had to deregulate and open its markets, and he gave Manmohan the crucial confidence to make those moves.”

“He feared he would be attacked by the party,” another top bureaucrat who worked with Singh at the finance ministry told me. “Because he had authored the current Five-Year Plan when he was deputy chairman of the Planning Commission, and he was now implementing policies which were totally contradictory. The PM and all of the secretaries told him it was okay, but it took time for this to sink in.”

On 24 July, a few weeks after presiding over a two-stage devaluation of the rupee, Singh stood up in the Lok Sabha to present his first budget, which laid out a series of structural reforms and fiscal adjustments: relaxation of industrial licensing, abolition of export subsidies, reduction in fund transfers to public enterprises and massive cuts in fertiliser subsidies and welfare programmes. At the close of his two-hour speech, the novice politician demonstrated a flair for rhetorical drama, uttering the lines that would be repeated in thousands of subsequent articles about Singh and the breakthrough of 1991:

I do not minimise the difficulties that lie ahead on the long and arduous journey on which we have embarked. But as Victor Hugo once said, ‘No power on earth can stop an idea whose time has come.’ I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now wide awake. We shall prevail. We shall overcome.

Singh’s budget, which would come to symbolise the unleashing of the Indian economy, met with a cold reception within the Congress party. At a meeting after the budget speech to discuss the new economic policies, a sizable crowd of MPs vented their outrage: they may have had little sense of how the macroeconomic changes would impact their political careers, but they were certain that slashing fertiliser subsidies, among other measures, would spell doom at the polls. “There was considerable unrest in the Congress ranks,” a CWC member and former cabinet minister told me. “There were as many as 63 backbenchers who spoke against Manmohan. PV really had to save him in that meeting.”

An excerpt from "Falling Man," published in The Caravan's October 2011 issue. Read the story in full here.

Vinod K Jose was the executive editor of The Caravan from 2009 to 2023.