Financial Daily from THE HINDU group of publications
Monday, Feb 25, 2002
Columns - Browser's Corner
Down memory lane
Former Prime Minister Indira Gandhi and the then Finance Minister R. Venkataraman
A word of advice to Shankar Acharya, Ashok Desai, Montek Singh Ahluwalia, Bimal Jalan, N.K. Singh, S.Venkitramanan, Jairam Ramesh and other top economic bureaucrats who were associated with the reforms process and with the shaping of economic policy during the past decade and more.
Please begin writing your memoirs now, if you have not already written them. Having recently reviewed the books of two prominent personalities who were associated with economic policy-making V.K.R.V. Rao and this book by I.G. Patel, one is aware that a lot has been left unsaid.
And much of that is attributable not so much to reticence and their innate modesty as to the impact of starting on their memoirs late.
What seemed so important then may not in retrospect and in the light of later developments, seem so crucial now. However, for economists and historians, it is important to understand the background of the decisions made by these policy makers.
As T.C.A. Srinivasaraghavan pointed out in Business Standard while writing about a gathering of economists recently "Economists seemed virtually oblivious to historical contexts. They knew what had happened in a general kind of way, but not why and how it had happened".
That could well apply to a whole lot of others which is why the gentlemen mentioned at the top should get cracking on their respective accounts.
Glimpses of Indian Economic Policy An insider's view by I.G. Patel, offers nuggets of wisdom for the economic bureaucrat and the lay reader alike. I.G. Patel served in many capacities most prominently as Chief Economic Adviser in 1962-67, as Economic Affairs Secretary between 1968 and 1972 and as RBI governor between 1977 and 1982.
These were tumultous years in the evolution of the Indian republic and in the shaping of policy responses to emerging problems. Dr Patel's glimpses, even when they are fleeting, provide a valuable insight into some of the important milestones in economic policy negotiating American aid, devaluation, bank nationalisation, gold control policy, the hardships caused by the 1971 War et al.
Dr Patel also had to do a delicate balancing act with the political leadership of the day. He survived the exit of Morarji Desai as Finance Minister in 1969, telling Mrs Gandhi in a straightforward way that he would stay as long as his bonafides were trusted and he was taken into confidence.
He seemed to have had a comfortable working relationship with Mrs Gandhi, although he admits that there were pressures on him from others such as L.N. Mishra, then Congress Treasurer. Dr Patel apparently managed to resist the pressures, but was also quite helpless when he was bypassed when the likes of Janardhan Pujari and Abdul Ghani Chaudhuri and even the then speaker of the Lok Sabha, who thought nothing of pressing inappropriate requests.
In fact, his tenure as Governor seemed to be replete with instances where he had to resist pressures. As for instance, when he stood up to A.R. Antulay, then Chief Minister of Maharashtra, who refused to see reason about the ill effects of writing off farmer loans.
R. Venkataraman, the then finance minister, to whom both went for arbitration was reluctant to annoy Antulay and his refusal to stand up firmly and be counted did lead to some reckless lending.
Then there were touts with political patronage offering loans at rates more favourable than what was available in the market a clear case of money laundering. It says something about the system that we continue to hear bankers facing the same problem even today.
Politicians, save a few honourable exceptions were clearly not quite up to it when it came to governance and handling the economy. That comes through in another instance, when Dr Patel was sent to various states to explain why devaluation of the rupee was effected, he found that they were more keen to entertain him than listen to his explanations.
As he says, it was neither a popular nor a political issue. It was only because it was followed by a spell of economic hardship caused by drought and food shortages that it came into national consciousness with negative connotations.
There is also a revelation of how bank nationalisation was decided by Mrs Gandhi and poor Dr Patel was asked to give effect to her wishes by drafting a bill, a note for the cabinet and a speech for her within 24 hours.
However, well-intentioned economic policies are, they need to take it into account everything politics, history, psychology, practicality etc.
With all its good aims the gold control policy failed badly. As Dr Patel points out, even faulty economic policies cannot be withdrawn without affecting some sections of society and some kind of compensation mechanism may be needed for these segments.
And as he says in the concluding part of his book "Economics at the end of the day is about choice; and the right, ability and desire to choose which includes choosing something difficult, not yet there and working for it."
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