Manmohan Singh, the leader who liberalized India

As the parliamentary session began, a frail medium-height technocrat, Manmohan Singh, who was the then finance minister, stood up and, in one fell swoop for the next hour or so, liberalized and globalised the Indian economy on a scale never seen before. He gave back to the Indian people the economic freedom they were promised when the Constitution was adopted, but which they never got due to the license quota Raj and control regime of the government of that time.

As he concluded his speech, Manmohan Singh quoted Victor Hugo: “Nothing can stop an idea whose time has come." India’s time had come, liberalisation and globalisation arrived and India would march ahead.

The changes led to the reduction of customs duties on all imports, freed up the foreign exchange markets and floated the Indian rupee. This also led to easier overseas travel and a liberalized investment regime. License quota Raj was largely abolished, reservation for small-scale industry was reduced, capital markets were freed from controls, banking was liberalised, and the Indian entrepreneur was freed and unleashed from the bondage of the past 40 years due to bad economic policies.

All over India, industry was shaken. Suddenly, they had to face competition from overseas, but at the same time, there was great opportunity and economic freedom for people to start businesses, grow their businesses, raise capital freely from the capital markets without any controls on pricing, travel overseas, and ensure that they could export easily.

It took some time for India and its citizens to understand the changes, but the results were dramatic over the last 33 years.

GDP grew from $275 billion in March 1991 to around $3.5 trillion in March 2024, a CAGR of 8.11% in US dollars, a growth rate never seen before in India's history since Independence.

However, the economic liberalization process also meant increased competition, the flow of capital from overseas, and the takeover of Indian companies.

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The Hashad Mehta scam led to a stock market boom and a bust, forcing Dr Singh to stand up in Parliament and say that he did not lose any sleep because of the market movements.

It also, over time, got the backing of the old establishment, which had benefited from the control regime, and came out with their old recipe: business had to be controlled, and taxes had to be high so that the money could be channelled to subsidies for people.

Liberalization and globalisation happened to a large extent in the first two years after 1991 and then faltered, leading to some government scams as it neared its five-year term.

However, the animal spirits released by Singh's liberalization continue to serve India well. The Indian IT service industry is an outstanding example of what liberalization could mean for the Indian entrepreneur. From almost negligible export of software with huge controls in 1991, today we export $215 billion of software, getting about $145 billion of cash into the Indian economy, and creating nearly six million high-quality jobs. Today, 60% of global outsourcing comes to India. It created a new middle class in India.

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Today, India is the second largest digital power in the free world, outside of China. The Indian educated middle class was the prime beneficiary as well-paying jobs increased in technology, banking and financial services and the service sector. Indians were now global citizens in technology and management.

However, Indian industry also protested that a sudden lowering of tariffs meant that they were naked and subject to very harsh global competition by entities that had a lower cost of capital and surplus capital and could invest in and buy Indian enterprises, which looked very cheap at that point in time.

They wanted a graduated liberalization of custom tariffs so that they could adjust. The CPI(M) too put its weight behind this and as a result some of the tariff reduction became more gradual. In retrospect, it did help India to retain its own industries and to make sure that these industries remained in Indian hands.

Foreign capital came in large numbers, and today, we have a robust economy where foreign capital can invest in most areas and Indian businesses can compete for markets.

Today, the capital markets are indeed very robust and reward entrepreneurs. We have global-scale industries that are export-oriented, such as technology and software, pharmaceuticals, large parts of manufacturing, especially the auto sector, speciality chemicals, and now the electronic sectors due to PLI. Many service industries, too, are world-class.

Nobody at that time believed India could compete globally, and now, the Indian entrepreneur is on the go. To those of us who were witness to the control regime and suffered and saw liberalisation and globalisation , the results was like magic!

Singh returned as prime minister in 2004, when the United Progressive Alliance (UPA) won a shocking victory and he was chosen as the prime minister. In the first UPA term, the economy was roaring because of the reforms of the Vajpayee government, which ended the term in 2004 with about 8.3% growth. Singh ensured the growth momentum remained, though there were not many economic reforms due to the coalition partner, the CPI(M).

However, later, we saw high inflation due to massive government spending and as global oil prices rose, but there was also high growth and employment.

Singh brought his government back to power in UPA II in 2009. But by that time, the old order in his party was putting their hands in the till, and corruption scandals became much more frequent. There were many complaints that most ministers did not listen to the prime minister.

Multiple voices spoke up for the government. Singh's loss of authority as PM ended in ignominy with the massive victory of the National Democratic Alliance (NDA) led by Narendra Modi in 2014.

If one looks back at the achievements of Singh, one finds a technocrat devoted to his country–open, transparent, of great integrity–who always focused on the welfare of people. Though he obeyed his political bosses of the day as he was part of the earlier control regime, he showed his ability to think through and open up the economy, liberalize and globalise when he had an opportunity under PM Narasimha Rao.

Every decade has its own political leaders who made a big mark in India. Certainly, in the decade of liberalization, Singh was the tall figure who liberated us economically along with Prime Minister Rao, who gave the political cover to open up the Indian economy.

Later, when Singh became prime minister, he was in the shadow of the controlling agents of his political party, who probably did not give him any freedom, but he continued his work.

He asserted his authority to get through the India-US nuclear deal , but for most other matters, he became subject to extra constitutional authorities who tried to impose a European- style social welfare state in India.

But all said and done, Manmohan Singh will always be remembered as the leader who liberalized India, as a technnocrat who created an economic framework for India to grow, and as the compassionate leader who ensured that social security measures were implemented, and the people at the bottom of the pyramid got adequate protection in the form of subsidies and various policies.

He was a gentle soul, soft spoken, a great listener, a good economic thinker, and a man of compassion and integrity.

He was attacked for leading a corrupt government and abused several times, but he never resorted to insulting others. Most citizens rallied behind him during these personal attacks because they believed in his integrity.

Singh was a colossus in the Indian political firmament and liberated Indians from the bondage of the license-quota regime.

Goodbye, Dr. Manmohan Singh. We shall always remember you and are grateful to you for your service to India and all Indians.

T.V.Mohandas Pai, chairman, Aarin capital Partners.