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

• Author: Martin Wolf
• Position: Financial Times associate editor and chief economics commentator.
• Pages: 55-55

BOOK REVIEWS

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.

June 2020 | FINANCE & DEVELOPMENT 55

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