Raghuvir Srinivasan

Vajpayee — the intuitive reformer

Raghuvir Srinivasan | Updated on August 16, 2018

Spearheading the highway revolution   -  PTI

Policies that helped expand highways, cut mobile tariffs, lower interest rates and privatise PSUs stood out

Atal Behari Vajpayee was a reformer at the core of his being, be it the economy or politics. While Manmohan Singh and PV Narasimha Rao get all the credit for being the original economic reformers — and rightly so too — Vajpayee was the rightful inheritor of their reformist legacy.

He picked up the threads from where Rao and Singh had left them and carried reforms forward during his eventful tenure between 1999 and 2004. It must not have been easy.

The period was marked by turbulence, both self-created and external. The sanctions on India following the nuclear tests of 1998 imposed tremendous strain on the external finances while the dotcom bust of 2001 sent the global economy — and with it India’s — on a tailspin. But Vajpayee, India’s first right-of-centre prime minister, refused to take his foot off the reform pedal.

If Vajpayee were to be remembered for just four important things he did for the economy, they would be the following:

Building highways: He realised quite early in his tenure that investing in roads was the key to development. And thus was born the National Highway Development Programme (NHDP).

The key constraint until then was funding and Vajpayee’s government solved it by imposing a road cess on every litre of petrol and diesel sold in the country.

A suitable legislation was enacted for this purpose in the form of the Central Road Fund Act in 2000, which empowered the Centre to levy the cess which was fully dedicated to the NHDP.

Vajpayee trusted and empowered the National Highways Authority of India (NHAI) by doing away with the process of project-wise approval for every road that the NHAI planned to build.

The Centre would approve a programme, say the Golden Quadrilateral, and implementing it, including awarding of contracts, was left to the NHAI. This was a crucial reform measure that collapsed the time-schedules and eased the process for awarding road projects.

Between 1947 and 1991, the country had built a total of 34,000 km of national highways; this grew to 58,000 km by 2001 and further to 71,000 km by 2011 (a major part of the growth between 2001-11 happened during the NDA regime). Today, the Golden Quadrilateral connecting the four main metros — Mumbai, Delhi, Kolkata and Chennai — is aptly remembered as Vajpayee’s baby.

Mobile revolution: The mobile phone may have been introduced to the country in the mid-1990s but it failed to take off, bogged down as it was by a policy quagmire and unaffordable tariffs.

With per minute tariff of as much as ₹16, and billing for both incoming and outgoing calls, the so-called mobile revolution was going limp. It was left to Vajpayee’s government to untangle the wires and reform the industry.

The New Telecom Policy that Vajpayee unveiled took the major step of moving from licensing fees for telecom operators to a revenue-sharing mechanism. This one step eased the burden on telecom companies and ushered in the present regime of falling tariffs and competition that we all are only too familiar with now.

Low interest-rate regime: We’re used to repo rates of 5-6 per cent now and protest when rates move beyond this range. But fact is that until the late 1990s, the official bank rate was in the double digits at 10-11 per cent. Retail lending rates were upward of 15-16 per cent as banks passed on their inefficiencies to borrowers.

By the time Vajpayee laid down office in 2004, the repo rate was down to 6 per cent having steadily declined over the five-year period. This was possible due to prudent management of the macro-economy — the Fiscal Responsibility and Budget Management Act, was first enacted by the Vajpayee government in 2003. Inflation was kept on a tight leash at under 5 per cent while the economy continued to grow at an average 6 per cent. The sustained spell of low interest rates laid the foundation for the economic boom that followed during the first term of the UPA. While industry leveraged merrily to invest in fresh capacities, common borrowers jumped in too giving a fillip to the real estate and housing loan sectors.

Privatisation: The tentative disinvestment programme of the 1990s was overhauled in its philosophy — the government was not chary of privatisation any more. A separate ministry was created for this purpose under the redoubtable Arun Shourie who raced full steam ahead to initiate some of the most successful privatisations in this country.

Thus, the Centre handed over majority shareholding and control in Maruti to Suzuki in 2002 through a complex transaction, sold off controlling stakes in Bharat Aluminium to the Sterlite group, Indian Petrochemicals Corporation to Reliance Industries, VSNL to the Tatas and some properties of ITDC to different buyers.

No government since then has shown the resolve to privatise state-owned enterprises.

Published on August 16, 2018

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