N.K. Singh. Photo: HT
N.K. Singh. Photo: HT

How reforms shook up the world of babus

Former bureaucrat N.K. Singh says it was clear that the bureaucracy was not prepared and that adjustments would take time

About a week before India opened up its economy through its 1991 budget, then finance minister Manmohan Singh and a senior civil servant met with the petroleum minister and laid out before him the vision of a differently ordered world.

The man who accompanied Manmohan Singh, joint secretary at the department of economic affairs N.K. Singh, had been negotiating a deal with the Asian Development Bank for a loan for the oil and petroleum sector.

And one of the conditions of the deal was some “minor disinvestment". On hearing this, petroleum minister B. Shankaranand “broke down". “‘What are you suggesting? These are temples of modern India which have been built by the first Prime Minister,’ said Shankaranand," recollects N.K. Singh. “He could not comprehend that there would be a world in which you would even think of disinvestment of public undertakings."

The word ‘disinvestment’— much like privatization in the West—was a taboo in the initial days of liberalization. Here, it was called “bundling and unbundling of shares".

“Disinvestment was a dirty word. It was considered to be so heretical that you were trying to disinvest from a public undertaking. This was like re-writing the Bible or Quran or Bhagwad Gita. It was considered very inappropriate to talk to individual corporate leaders. Corporate leaders were always shadows. They were not people publicly talking to the government," says N.K. Singh, former expenditure and revenue secretary, who also served as secretary to Prime Minister Atal Bihari Vajpayee.

The transition, hated as it was, was inevitable. Before the general election, former prime minister Rajiv Gandhi had been assassinated on 21 May 1991, plunging India into a deep political crisis. Manmohan Singh took over as finance minister in the newly formed government of Prime Minister P.V. Narasimha Rao on 24 June at a time when the country was staring at a foreign exchange reserves crisis. Reserves would have lasted roughly weeks. The total external debt was $70 billion.

This was a period of anxiety, trepidation and uncertainty. It was clear that India had lived beyond its means. After Manmohan Singh’s budget speech on 24 July, some people who watched it with N.K. Singh asked him if there would be a second round of economic reforms.

N.K. Singh says it was clear that the bureaucracy was not prepared and that adjustments would take time as they were not just policy changes, but changes of attitudes. Liberalization meant that licensing, the bane of businesses, was tamed by the abolition of permits for all but a handful of industries; import-export policy was radically altered; and direct foreign investment freed up.

“I was a bureaucrat myself, and therefore I knew that whatever I was negotiating would be a kind of shock for the bureaucratic ethos. Bureaucracy survived in status quo being continued and perpetuated; that they had inherited a legacy that was quite a bit embedded in not questioning the status quo, and that the bureaucracy would suddenly find (itself being) confronted with changes that it had not really imagined. Doing away with regulations, and doing away with those things which had been taken to be fixed paradigms," says Singh.

N.K. Singh was revenue secretary in 1997, when then finance minister P. Chidambaram unveiled the so-called ‘dream budget’ when H.D. Deve Gowda was prime minister. Singh accompanied Chidambaram for discussions with Gowda on the proposed budget with multiple tax options, the most audacious of which was the recalibration of income tax rates into three slabs of 10%, 20%, 30% to rationalize tax rates and usher in a culture of compliance.

N.K. Singh, who has witnessed and been part of the “audacious" economic transition that India has undergone and now heads the panel reviewing the Fiscal Responsibility and Budget Management Act, 2003, says there are many sectors such as land and labour, that still need reform and it is time the country took steps towards this.

This is the 52nd part in a series marking the 25th anniversary of India’s liberalization. To read more from Days of Our Lives, click here.

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