Defending Modi’s reforms record: Chidambaram shifted goalpost from growth delivered by a PM to growth in h
By Arvind Panagariya
Economist Paul Streeten famously said that whereas academics make progress by sharpening questions they ask, politicians do so by obfuscating them. My column last month had asked a clear question: Did the reforms by Prime Minister Narendra Modi place him in the same league as PMs Narasimha Rao and Atal Bihari Vajpayee and ahead of PM Manmohan Singh? Answering this question required comparing reform records of the PMs, which is what I did. I answered the question in the affirmative.
True to his trade, distinguished politician and lawyer P Chidambaram has taken issue with my conclusion, not by offering evidence to the contrary but by changing the question. He asks which PM delivered most growth and concludes, “By that unquestionable standard, the ‘boom years’ under Dr Manmohan Singh make Dr Singh the reformer par excellence. Let Mr Modi deliver growth before he can aspire to a place among the pantheon of economic reformers.”
In view of the fact that the question “who delivered most reforms” is different from “who delivered most growth,” nothing Chidambaram has said changes my mind. He will need to offer a lot more evidence of reforms by Singh to change my mind.
Nonetheless, let me dissect more carefully the question on which Chidambaram prefers to focus: Who delivered the most growth? The first point to note is that how much growth “took place” during the tenure of a PM and how much growth he “delivered” are two distinct questions. As best as I can tell, Chidambaram considers these as one and the same question. Hence his conclusion: Singh “delivered” the most growth.
For a moment, let us play by his rule and treat the growth delivered by a PM as synonymous with that taking place during his tenure. By this metric, Singh delivered 7.7% growth over ten years, Modi 6.8% over six years, Vajpayee 5.9% over six years and Rao 5.1% over five years. The obfuscation of the question thus does make Singh the best performing PM, as claimed by Chidambaram. But it also makes Rao the worst performing PM.
If we additionally accept the growth during a PM’s tenure as the indicator of his reformist credentials, as Chidambaram would have us do, Rao would become the first PM to lose his place in the pantheon of reformist PMs.
This would, of course, be an absurdity of the highest order. Growth during Rao’s tenure was low not because he was not reformist – quite the contrary, he is the father of India’s economic reforms – but from the crisis he had inherited. The growth rate during his first year was just 1.1%.
But he did not “deliver” this growth in any meaningful sense. Instead, he inherited it from his predecessors who had brought the economy to the doorstep of a balance-of-payments crisis in 1991 by running large fiscal deficits on the back of large external borrowing relative to export earnings. In contrast, Rao himself handed his successor a financially sound economy that had grown 7.6% during his last year.
Turn next to Singh whom Chidambaram considers “the reformer par excellence.” When Vajpayee lost the 2004 election, he bequeathed to Singh an economy that had grown 7.9% in 2003-04. This growth had been the result of sustained reforms, especially during the last four years of his tenure. The question one must ask is exactly what reforms did Singh do to “deliver” 7.9% growth in 2004-05 and even higher rates in the following four years?
During a public debate with an erstwhile colleague of Chidambaram, I asked him to name three major reforms to which the high growth during the Singh era could be attributed. Unsurprisingly, no answer was forthcoming. Chidambaram has likewise chosen to sidestep this critical question, resting his claim of Singh as the top reformer on the growth rate during his tenure.
To his credit, despite pressures from within the Congress and left parties in the coalition, Singh did not allow the reforms of predecessor governments to be reversed during his first term. That helped preserve the growth momentum he had inherited. But sadly, Singh was unable to resist those pressures in his second term.
Numerous policy mistakes including retrospective taxation, weakened fiscal discipline, repeated interest rate hikes, Land Acquisition Act of 2013, irresponsible lending by public sector banks and blocking of environmental clearances followed. Those mistakes created a crisis-like situation in the summer of 2013, leading the Economist magazine to conclude in a story, “It is widely agreed the country is in its worst economic bind since 1991.” Singh bequeathed a much weakened economy to his successor.
Looking to the future, in view of the reforms already in place, the post Covid-19 decade, whenever it begins, will see India grow at an average rate nearing 8%. Therefore, whichever party or coalition comes to power in 2024 will get to preside over a rapidly transforming India as long as it does not reverse any of the reforms. If it carries them further, it will do even better.
Alas, it is not always the case that those who sow a crop also get to reap it.
Views expressed above are the author’s own