Manmohan Singh’s policies bore imprint of his far-sighted academics

With the reforms of 1991, former prime minister Manmohan Singh not only pulled India back from the brink of bankruptcy but also helped the country strut the global stage as a rising economic power. His policies bore imprints of his early academic insights, experts say.

Singh received his D. Phil from Oxford University’s Nuffield College under the guidance of Prof. Ian Malcolm David Little, an emeritus fellow at Nuffield and one of Britain’s foremost economists.

It’s no coincidence that Singh found his guru in Little. Little had played a key role in India’s policy making. A lesser-known fact about the “commanding heights” of India’s socialist-era planning is that the erstwhile Planning Commission worked closely with US and British economists to formulate its early five-year plans. This is contrary to the notion that India’s planning was an insular Soviet-style centralised exercise.

MIT economist Paul Rosenstein-Rodan invited Little to join the MIT India project. The project team, which came to New Delhi in 1958, also had well-known economists, such as George Rosen and Trevor Swan. It worked closely with Pitambar Pant, who led the perspective planning division of the Planning Commission. The foreign economists contributed greatly to India’s 3rd five-year plan document (1961-66).

Singh chose India’s export performance as his D. Phil topic, aiming to unpack answers to three questions that would allow the country to achieve, to use Singh’s words, “self-sustaining growth”.

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Singh’s thesis, “India’s Export Trends and Prospects for Self-Sustained Growth” [Clarendon Press, Oxford, 1964] was an incisive analysis of India’s inward-looking trade policy.

The former PM sought to “provide answers to the following major questions: First, what explains the stagnation in India’s export earnings from 1951 to 1960? Second, given the existing trends, what are India’s export prospects in 1970-1? Third, what are the major policy implications suggested by analysis…?” (in his thesis-turned book; Clarendon Press).

An overview of the paper, which made academic headlines, leaves little doubt that “Singh saw trade and tapping of India’s export potential, including in cotton, as a path to sustained growth,” said RK Mani, a retired economist with the Tamil Nadu Agricultural University.

“My interest in this study was first aroused by a feeling of dissatisfaction regarding the attitudes towards export promotion…” Singh wrote in his paper.

Singh was convinced, he wrote, that despite a “considerable (and justified) emphasis on import-saving investment, the country would need greatly to intensify its export efforts if it was ever to become ‘viable’ or ‘self-sustained’ in the sense that the economy ought to be able to balance its foreign-exchange budget without resorting to external aid of an extraordinary type”.

Simply put, Singh made the point that import-substitution industrialisation (the hallmark of Nehruvian policy) — which refers to industrialisation aimed at reducing the need for imports — must give way to what is known as export-promotion industrialisation. This is how the so-called Tiger Economies, Japan and South Korea made the leap.

Singh was to implement this idea in 1991. In July that year, Singh devalued the rupee. A stronger rupee, kept artificial high to make imports cheaper, had hurt India’s exports.

With the devaluation, Singh took the first steps to make Indian exports more competitive in global markets.

The technocrat also reduced import tariffs and removed curbs on foreign trade, allowing India’s integration with the global economy.

From having just about enough dollars for two weeks of imports in 1991, India’s foreign reserves soared to $25 billion in about four years due to Singh’s policies.

As PM, Singh would double down on liberalisation, albeit with social safety nets for the vulnerable, which together pulled 271 million people out of poverty between 2005-06 and 2013-14, according to the then Planning Commission’s figures.