Backstage: The Story Behind India's High Growth Years, Montek Singh Ahluwalia

Author:Martin Wolf
Position:Financial Times associate editor and chief economics commentator.
Montek Singh Ahluwalia
Backstage: The Story
Behind India’s High
Growth Years
Rupa Publications
New Delhi, 2020, 464 pp., $35.99
India's economic future was quite
uncertain, even before COVID-19.
India's Rise
and Stall
MONTEK SINGH AHLUWALIA provides an invaluable
insider’s account of the making of India’s economic
policy between 1979, when he returned to his
home country from the World Bank, where we
worked briey together and became good f riends,
and 2014. It is the story of a substantial success.
Ahluwalia was sure that the ai m in a country
as poor as India had to be hi gh economic growth.
is, in turn, required e conomic liberalization,
supported by pragmatic institutiona l reform. e
book details how the balance of payments crisis
of 1991 made this possible. e book gives due
justice for seizing thi s opportunity to the prime
minister, Narasimha R ao, one of India’s most
underestimated politician s. But the hero is former
Prime Minister Manmohan Singh, with whom
Ahluwalia worked close ly throughout. Ahluwalia
himself provided the needed pla n in 1990 with the
“M Document,” which “presented an integrated
strategy for reform— of scal policy, industrial
policy, trade policy, and exchange rate policy.”
Beyond question, these reforms shif ted India
onto a higher growth path. i s became even more
evident in the rst decade of t he new millennium,
when Ahluwalia joined the United Progressive
Alliance ( UPA) government as deputy chairman of
the Planning Comm ission, under Prime Minister
Singh, between 200 4 and 2014. As he states, “e
rst seven years [of the UPA government] recorded
a growth rate of 8.5 percent. Indicators such as
export growth, private invest ment, and reduction
in poverty also showed exc ellent performance.”
Yet the book also raises importa nt questions.
Here are just three.
First, as Ahluwa lia notes of the 1990s, “e
approach to change was a combination of grad-
ualism and what I have ca lled ‘reform by stealth.’
Why were politicians, notably the Cong ress Party,
never willing to ma ke the success of these reforms
and the need to take them f urther the center of
their polit ical plat form?”
Second, why has growth dec elerated? Two com-
plementary explanations emerge f rom the book.
One is that the growth wa s in part a result of an
unsustaina ble credit boom in the private sector. at
left a legacy of ban krupt companies and weakened
nancia l institutions— the “twi n-balance-sheet
problem.” Another is that the initial reforms, pre-
dominantly liberali zation following the dismantling
of the “License Raj,” had by then done all they could
do. India needed second-generation reforms, notably
of its institutions. But, as Ah luwalia writes, “we
did not pay enough attention to the need to build
institutions that would promote good governance.”
Finally, what happens next? Ah luwalia describes
the economic record of the six years of Narendra
Modi’s National Democratic Alli ance government
as “beginning with a bang and ending with a
whimper.” e government has achievements
to its credit. But it has done undesirable things
(notably demonetization) and not done d esir-
able thin gs (notably resolving the debt problem).
India’s economic future was quite uncertain, even
before the COVID-19 pandemic.
Yet Ahluwalia himsel f was an optimist when he
returned to India in 1979. He was also an optimist
throughout his career. He is, he concludes, stil l
today “an unrelenting optimist t hat...the India story
of high growth and de velopment will...continue.”
We must hope he is right.
MARTIN WOLF, Financial Times associate editor and chief
economics commentator

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