“Trade policy was pretty fundamentally restructured in about 10 hours” -Governance Now

“Trade policy was pretty fundamentally restructured in about 10 hours”

There had been quite a lot of internal rethinking on policy, but no real changes had been made. Dr Manmohan Singh used the opportunity of the crisis to push structural reform, said Montek Singh Ahluwalia

Jasleen Kaur | July 16, 2016 | New Delhi

#trade policy #Manmohan Singh #Economic reforms #Montek Singh Ahluwalia

“The crisis was really severe. No one younger than 45 can imagine what it was like. We had run out of foreign exchange, the rating agencies had downgraded us and imports had to be squeezed so severely that GDP growth dropped to 1.4 percent in 1991-92,” said Montek Singh Ahluwalia who was commerce secretary at the time of the 1991 budget that triggered economic reforms.

In an exclusive interview that appears in the special edition of Governance Now to mark 25 years of economic reforms, Ahluwalia said that Narasimha Rao decided to have a technocrat as finance minister and Dr Manmohan Singh went into action remarkably quickly.

“But Dr Singh didn’t just act to control the crisis. He rightly chose to pursue structural reforms, without which the economy would never be able to grow rapidly. Most people have no idea what an absurd control system we were running, with the government interfering in all sorts of decisions which were better left to the private sector responding to the market.

“There had been quite a lot of internal rethinking on policy, but no real changes had been made. Dr Singh used the opportunity of the crisis to push structural reform. One cannot say there was consensus on reforms. The left was bitterly opposed and many in the political class had doubts. But the technocracy was convinced and the government persevered and the country benefited from that,” said Ahluwalia.

On the key points of his 1990 paper that drafted a blueprint of reforms, Ahluwalia said that VP Singh was the prime minister and he asked him to write a paper outlining the policy changes we needed, “so I put together my views on issues we had been discussing internally and which I had hoped to put before Rajiv Gandhi had he been re-elected. The paper was discussed in the Committee of Secretaries. It was controversial and leaked and was published in the Financial Express and was often referred to as the ‘M Document’.”

“To summarise, the paper proposed bringing the fiscal deficit under control which is of course a standard mantra, but it also recommended a new approach to industrial policy, trade policy, MRTP relaxation, public sector reform and FDI policy. Taken together it was a fairly comprehensive agenda and it scared many people. But one year later, the reforms in 1991 actually did more. “

Ahluwalia has an abiding memory of July 3 meeting between finance minister Manmohan Singh and commerce minister P Chidambaram that firmed up basic trade policy changes – a key component of reforms.

“The whole thing was agreed in one meeting between commerce minister Chidambaram and Manmohan Singh on July 3. We made our case (I was the commerce secretary at that time), the finance ministry officials were not in favour, but Dr Singh overruled them. Two hours later we had all the papers ready, and went with Dr Singh to see prime minister Narasimha Rao. Chidambaram explained what we wanted to do, the PM just asked Dr Singh whether he agreed, and when Dr Singh said he had signed the file, the PM just took the file and signed. The deed was done.

“No groups of officials, no GoMs, even the PMO was not actively involved. Trade policy was pretty fundamentally restructured in about 10 hours! I always felt it demonstrated that the Indian system could work if ministers understood what was involved and directly sorted out issues. Had the same proposal been moved “on file” I bet it would have got stuck somewhere. The lesson is we need much faster decision making with less shuffling of files and ministers taking responsibility.”

To read the full interview click here

Comments

Other News

NIEPID, Jai Vakeel Foundation sign MOU to scale quality education for Children with Intellectual Disability

To address the need for a uniform curriculum for children with Intellectual Disability in India an MOU was signed between the National Institute for Empowerment of Persons with Intellectual Disabilities (NIEPID) and Jai Vakeel Foundation(JVF) in the presence of Rajesh Aggarwal, secretary, department

Why Right to Peace matters

The world has become less peaceful over the past few years, chiefly because of external armed conflicts. While the world leaders claim to value peace and the respect for human rights and commit to restore peace when it is breached, the global peacefulness remains defined by conflicts, deaths, and the large

Rise in gold prices: Boon or bane for the Indian family?

In India, gold is not just a commodity; it is tradition, sentiment, security and status rolled into one. It sparkles in wedding ceremonies, rests silently in lockers and forms the bedrock of generational wealth for millions. It is no exaggeration to say that Indians do not merely buy gold – they pres

Beyond participation: Why Indian women need economic justice

India pronounced its commitment to gender equality, decent work and inclusive participation in economic, political and social spheres for women. While the rhetoric of progress fills the air, the lived reality for millions of women in India paints a starkly different picture. Despite carrying a heavy worklo

NSE ranks 4th globally in IPO fundraising

The National Stock Exchange of India (NSE) has emerged as the fourth largest exchange in the world in terms of IPO fundraising during the first half of calendar year 2025 (H1CY25), according to data from S&P Global Market Intelligence. Between January and June 2025, the NSE raised $5.51

On World Youth Skills Day, let’s ask: What will it take to retain Gen Z?

On World Youth Skills Day, observed every year on July 15, we’re reminded that the future of any economy depends on how well it invests in its youth. In India, where over half the population is under 30, the question of youth skills is not just about employment, it’s about meaning, wellbeing, a