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Home >News >India >‘Making decisions outside the rule book rang in telecom’s success’

Former IAS officer N.K. Singh is the chairman of the 15th Finance Commission. He’s had a seat at the table of most economic and policy reforms that have taken place over last 50 years, as he details in his biography, Portraits of Power: Half a Century of Being at Ringside. He is also chairman of the Fiscal Responsibility and Budget Management review committee, which sets targets for the government to reduce fiscal deficits. He shares some big moments of the last 30 years of India’s reforms story.

When A.B. Vajpayee became prime minister in 1998, the telecom sector was in disarray. He had it cleaned up and telecom became a success story…

Yes, banks had lent large resources to private telecom operators, the private telecom operators were unable to meet contractual obligations of the bidding process for telecom circles, the cost of each telephone for the consumer was exceptionally high and the market size remained skewed. Vajpayee called us and said find a solution. The solutions were very complex. We had to move over to an NTP-99 [National Telecom Policy] based on a revenue-sharing agreement. This resulted in a fundamental change towards telecom licensing. There were many hurdles, including how the liabilities of the past would be discharged. Vajpayee was sagacious enough to realize the multiplier effects of a good telecom ecosystem. The portfolio was changed, Vajpayee became telecom minister himself. It was a very strategic intervention to prevent the collapse of what has turned out to be one of the important growth multipliers of the economy by taking decisions which were not in the rule book but were in the larger interest of the country.

Did 1991 reforms strengthen Vajpayee’s hand when he decided to consolidate nuclear power, demonstrating the link between economic reforms and national security?

In 1991, we were dependent on external balance of payments support from the International Monetary Fund, World Bank, regional development banks, Aid India Consortium. The US had a strong say in the decision-making process. As long as we were dependent for our balance of payments strategy on these entities, flexibility in the area of national security was limited. So a decision like the nuclear test—which everybody realized was a power statement—invited sanctions, but the ability for the country to withstand those sanctions were dramatically higher when Vajpayee became prime minister. Following the 91 reforms the economy had begun to look up, our economic strength gathered momentum, our confidence gathered momentum, in 1993 we had paid off all the debt to the IMF. We were no more a programme country of the IMF. All that when taken together really does bring out and highlight the importance of economic strength and security flexibility. Only countries which are economically strong can also hope to become important defence and strategic partners.

You worked on the 1997 budget. Why is it called the ‘Dream Budget’?

It’s a very difficult question. It’s called a ‘Dream Budget’ I guess because it took unconventional steps in the rationalization of direct taxes in general, and income tax in particular. Before that, India’s tax regime was littered with multiplicity of rates. Much earlier, the marginal tax rates on income were so atrociously high that the equation between work and leisure tilted the scales in favour of leisure. P. Chidambaram’s budget of 1997, with which I was closely associated as the revenue secretary, took the audacious step of rationalizing income tax rates into just three: 10, 20, 30. There were no surcharges. The credit has to be given to Prime Minister H.D. Deve Gowda; his innate judgement was favour of this. We gave him two models. In the second model, the [upper] rate was higher because some people felt 10-20-30 for a poor country like India was not progressive enough. He was not necessarily a specialized economist but he opted for a deep simplification and rationalization of income tax rates.

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