Indian industry doyen and Infosys founder Narayana Murthy said that the country owes it to Dr Manmohan Singh, Montek Singh Ahluwalia and P Chidambaram for the ‘economic freedom’ that they ushered in with their policies. Murthy said that India got economic freedom only in 1991.
“While we got political freedom in 1947, we got economic freedom only in 1991. And we owe it to Shri Narasimha Rao. Let us be very, very clear. Yes, Dr Manmohan Singh was his finance minister. If the Prime Minister had not fully supported Dr Manmohan Singh, I don’t know if it would have been possible. Dr Manmohan Singh, Shri Montek Singh Ahluwalia, and Shri P Chidambaram – these were the three people that ushered in economic freedom for India. We all should be very grateful to them,” said Narayana Murthy in a podcast with TV Mohandas Pai called 'The Record'.
Murthy explained that the 1991 economic reforms did three-four things – it removed licencing in certain areas like high tech, which enabled corporate leaders to take decisions and strategise in their boardrooms instead of waiting in the corridors of North Block. The reforms did away with the office of the Controller of Capital Issues in Delhi. “I don’t think he understood capital markets, there was hardly any capital market in Delhi, it was in Bombay. And that person, he was a civil servant, rarely gave any premium when you had your IPO…but what these architects of economic freedom did was that they realised that office was superfluous, they abolished that office,” he said.
“The third thing they did was they introduced current account convertibility. Of course, the governor of RBI was an important player in that. The good thing about current account convertibility is that you did not have to apply to RBI and wait for 10-12 days before you got the approval to travel,” he said.
Narayana Murthy said that the architects of economic freedom allowed us to travel at our will, to have international credit cards, to hire consultants in quality and in some ways to acquire companies also.
The government of Prime Minister PV Narasimha Rao wanted to bring in certain measures for macroeconomic stabilisation through fiscal correction. The government brought in fiscal reforms to restore fiscal discipline and correct fiscal imbalance. It brought in monetary and financial sector reforms by doing away with interest rate distortions and rationalising the structure of lending rates. The government introduced reforms in capital markets, industrial policy, trade policy, foreign investment, and rationalising exchange rate policy.
To navigate this complex process of steering the economy out of an economic crisis that was the result of a deficit in payments balance due to India’s skewed reliance on imports, among other factors, PM Rao appointed Manmohan Singh as the finance minister. Following the groundbreaking budget of 1991, Singh continued to introduce structural measures over the next few years. He is fondly credited as the ‘architect of modern Indian economy’.
Montek Singh Ahluwalia, who would later go on to become the Planning Commission Vice Chairman, was the Commerce Secretary when Singh presented the 1991 Union Budget. He later on became the Economic Affairs Secretary and then the Finance Secretary, and was instrumental in introducing the reforms.
P Chidambaram, who later on became the Finance Minister and Home Minister too, was the Minister of State (Independent Charge) in the Ministry of Commerce then. He is credited for making radical changes in India’s export-import (EXIM) policy.
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