When Dr Singh took over as finance minister in 1991, India’s economy was on the verge of collapse. Foreign exchange reserves were no more than $1bn – just enough to finance two weeks of imports, the government’s fiscal deficit was as high as 8.5% of GDP, and no foreign creditors were willing to lend to India. Dr Singh told the then prime minister, Narasimha Rao, that if the country took bold measures to reform, there was a chance that they could convert the crisis into an opportunity. So began the story of India’s economic reforms.
Now that he is prime minister, Dr Singh is keenly aware that agriculture, which supports nearly two-thirds of Indians, has lagged behind in India’s growth story. He appears to have dug into his roots as a student of economics at Oxford and Cambridge under teachers such as Joan Robinson, Nicholas Kaldor and Maurice Dobb, to come up with what some might call a Keynesian solution.
In his address to the nation soon after taking charge, Dr Singh declared that much of the focus in the first decade of economic reforms was on getting the government off the back of private enterprise, and removing controls that bred corruption. But the government could not ignore its responsibility to provide social and physical infrastructure such as education, public health, drinking water, sanitation, roads, railways, irrigation and power. Agro-processing industries will get tax breaks and agricultural credit will be doubled over the next three years.
“The reform of administration and of public institutions to improve efficiency and the quality of delivery services will be our immediate priority,” said Dr Singh in the address. The challenge his government faces, however, is that agriculture is largely under the purview of India’s federal states, many of which are in deep fiscal crisis and are not governed by the ruling coalition.
