Eco-yatra : traversing the path of India's economic change for the last six decades 9780070680692, 0070680698

Table of contents :
Cover
Contents
Chapter 1: Going Back a Little
Chapter 2: The Initiation
Chapter 3: At the Deep End
Chapter 4: Further Afield
Chapter 5: The Turbulent Years—I
Chapter 6: The Turbulent Years—II
Chapter 7: Winds of Change
Chapter 8: A New Chapter
Chapter 9: The Unkindest Cut
Chapter 10: Steady On
Chapter 11: The ‘Aam Aadmi’ Way
Chapter 12: At the End of It All
Endnotes
Biblography
Index

Citation preview

Eco-Yatra: Traversing the Path of India’s Economic Change for the Last Six Decades

Eco-Yatra: Traversing the Path of India’s Economic Change for the Last Six Decades

PROSENJIT DAS GUPTA Former Executive Director Indian Refractory Makers Association

Tata McGraw Hill Education Private Limited NEW DELHI

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To the memory of my parents Karuna Kumar and Jyotsna Das Gupta

Preface

An attempt has been made through this book to give an account of the principal events that occurred in India’s economic history since the 1950s, as seen from the perspective of my career of over 24 years starting from 1966 in a leading chamber of commerce in Calcutta and subsequently in an established industrial house. The need for this sort of an account came from the question that had been on my mind for quite a few years: why in spite of so much effort, investment and sacrifice on the part of so many, has poverty and ignorance persisted in the country. Several veteran and knowledgeable economists and theoreticians have examined all the aspects of the two major segments of the economy—agriculture and industry—to arrive at some answers, which have been very helpful in providing important pointers—if not answers—to this most important and central issue. This account tries to string together different strands of thought that emerged on this subject, and relate it to the bread and butter issues that concerned and shaped the Indian industry, economy and society over the past 50 years or so. The book also attempts to provide an insight into the Indian economic history as seen through the eyes of a person from eastern India, for the contribution of this region to the development of India has not been adequately discussed earlier. After all, West Bengal in 1953 accounted for about 24% of the value of industrial output in the country; by 1998–99, this had come down to 4.3%. The story of India’s economic evolution would therefore bear re-telling as it would serve to supplement what a professional economic historian with largely an all-India perspective would normally record. This is however not by any means the work of a professional economist who would usually tend to analyse and dissect the economic policies formulated by themselves. The career in a chamber

viii Preface of commerce—that too with hoary traditions—provided a unique opportunity for me to be a participant in the events of the day and to still be able to maintain distance as an observer. In those easier times of a 9 to 5 job, there was always time to think and ponder, and gather information and knowledge along the way, rather than the pre-cooked eatables and “fast-food” way of life that many have been compelled nowadays by force of circumstances and technology to adopt. So, this account of India’s economic changes pertains to history and people in the sense that it records how people from different walks of life, with different backgrounds, and with differing strengths and foibles, had responded to the economic and social changes of those days. Thus, Economics as well as some contemporary aspects of political history have been discussed earlier. It is of course factual in terms of the chronological unfolding of economic policies and events in the country. I have adopted a “factional” (that is, weaving in facts with elements of fiction), approach with occasional biographical references so as to keep the account at a human level and also to be able to touch critically on some of the acts of commission and omission on the part of some leading players. There is a large cast of persons in both exalted and very ordinary positions, who willy-nilly were involved in trying to understand and cope with the economic and political changes of those days. Hopefully what has been recounted here would serve as history as it covers events that actually happened since the early 1950s in more or less chronological order. But these seem to have been lost sight of and have thus, nowadays been assigned to the “Trash Box” with the development and spread of IT, with its own demands on time and work habits. Noted author, Nirad C. Chaudhuri, called India The Continent of Circe, that fabled land that has exerted some mystic allure over eons for people from central Asia, the Middle East, Africa and later from the Iberian Peninsula, and even later from mainland Europe and the British Isles. In spite of the trials and tribulations and ravages of conquest and pillage—from both external and internal forces—it retains this allure, this promise, even after the five thousand years or so since the first immigrants trudged through the mountain passes lying to the north-west

Preface

ix

of the Indian sub-continent. So, the story—as any good story should— has a happy ending, of much hope and promise. PROSENJIT DAS GUPTA

Acknowledgements

It has given me a degree of satisfaction and sense of fulfilment to see two—and at times more than two sides—to an issue. First, it started with my parents, devoutly religious and yet free from any dogma; doggedly honest and innately humane. Possibly they may have had in some part shaped my thinking and being. Second, my schooling at St. Xavier’s Collegiate School under the Jesuit fathers did expose me to a certain degree of dogma, but at the same time opened my mind to the history and the geography of this country and indeed, of the world—and, with their discussions and debates on theology and morality, to the possible different facets of an issue. Third, the three years at Presidency College—three happy years full of hard work, heart-break, a deepening thirst for knowledge and a greater sharpening of the powers of discernment and debate. I can recall with pleasure. I cherish the memories of the discussions in the Economics Department library, during the tutorials and also in the Coffee House amidst the swirl of smoke, the aroma of fresh coffee, and endless debates on Indian Planning, the mixed economy, the studies by Ragnar Nurkse, W. Arthur Lewis, Nicholas Kaldor, Michal Kalecki, Daniel Thorner, P. N. Rosenstein-Rodan, our own P.C. Mahalanobis, D.R. Gadgil, C.N. Vakil and P.R. Brahmananda, and the articles recently published in the Economic Weekly. These and other ideas and theories were elaborated and analysed in the classes by stalwarts of Economics and of Indian Economic Studies such as Professors Bhabatosh Datta, Sukhamoy Chakravarty and Tapas Majumdar. Later, in the MA classes at Jadavpur I was to be further encouraged by the teachings of Professors Panchanan Chakravarty, P. Sarbadhikari and Ambika Prasad Ghosh. Last but certainly not the least, I have been deeply enriched by my stint form 1966 and 1990 at The Bengal Chamber of Commerce and

xii Acknowledgements Industry—the premier institution for trade and industry—where I had the opportunity to work with different industries at different points of time, and to read and learn about Economics as it actually affected people. Moreover, professionally and otherwise, I am very grateful to late Walter MacWilliam Paris, Secretary of the Chamber between 1969 and 1972, and to Tarun Das, the then Deputy Secretary of the Chamber (and currently the Chief Mentor of the Confederation of Indian Industry). I would also like to recall with gratitude the selfless dedication and commitment of some of the senior members to their respective industries such as engineering, flour milling, import-export trade, freight broking, tea trade, refractory products, etc., and who at times literally led me by the hand in the course of my work at the Chamber, in dealing with difficult situations. This had been both instructive and humbling. The errors and omissions in the book are entirely my responsibility. PROSENJIT DAS GUPTA

Contents

Preface Acknowledgements 1. Going Back a Little

vii xi 1

2. The Initiation

12

3. At the Deep End

24

4. Further Afield

40

5. The Turbulent Years—I

55

6. The Turbulent Years—II

65

7. Winds of Change

84

8. A New Chapter

103

9. The Unkindest Cut

118

10. Steady On

130

11. The ‘Aam Aadmi’ Way

142

12. At the End of It All

159

Bibliography Endnotes Index

174 176 177

Blurb

There had been times when a GDP growth of 3.5 or 4% per annum in India was thought to be remarkable. Nowadays, people feel miffed if the growth rate registers 7.5% rather than 8%. There had been times when inflation had been over 25% in a year, and the people have had just to live with it. Presently, even a 10% inflation rate is popularly unacceptable. Gone also are the days when one had to wait for days to get a permit for issue of some cement for house-building or, for a day to be able to make a phone call to a relative in Mumbai or to an office in Delhi. Eco-Yatra: Traversing the Path of India’s Economic Change from the 1950s to around 2009 tells the story of how this change took place over the last 60 years or so, when in 1952 Jawaharlal Nehru presented the nation with the First Five Year Plan with an investment plan of just Rs. 2,070 crore (in comparison the Tenth Plan 2002–2007 had an outlay of Rs. 1,484,131 crore). It sifts through hard economic data, while bringing out the broad trend lines, without losing sight that economic development also has an underlying human dimension. Thus, at one level, the book traces the changes that impacted the people at a human level; at another, it takes the reader past the major milestones on the road to economic change over the last 60 years; not in a bookish way, but as a chronicle of national and individual aspirations and achievements.

Chapter

1

Going Back a Little

Prasad remembers the day very well, even after the passing of more than 40 years. It was 20 October 1962, and a certain chill had entered the air when that evening he proceeded in an auto rickshaw from Jangpura in south Delhi, where he had put up with his sister on a short vacation, to the Old Delhi railway station. On Bahadur Shah Zafar Marg, as he chugged along, he happened to notice an illuminated board outside the office of one of the major newspapers of the city. It said simply, ‘Chinese attack in NEFA – President declares Emergency’. The auto driver did not even glance at it as, in the gathering gloom of that autumn evening, he pushed on towards the railway station. Even to Prasad, it meant very little. NEFA he had heard of—it was too far away in any case—and he knew little about the Chinese (except that they had many shoe shops and restaurants back in Calcutta), or what they wanted in NEFA. It was much later that he was to read about the grievous miscalculations—perhaps even deliberate misinterpretations or self-serving delusions—in the political, military, and strategic fields by the country’s political leaders in those days, as recorded in Brig. J.P. Dalvi’s Himalayan Blunder. In any case, just then he looked forward to his visit to one of his aunts in Mussoorie.

2 Eco-Yatra With all that, the visit to Mussoorie for a couple of days only, went off quite well, with excellent views of the great arc of Himalayan peaks from a point close to the villa where the Dalai Lama had been put up, shortly after his leaving Lhasa and Tibet in the wake of the Chinese occupation in 1959.

At the station, the coolies harried the passengers as usual, and people ran hither and thither with their luggage and children in tow. The Delhi University cricket team, which shared the compartment in the Doon Express with Prasad, was a hearty and boisterous lot, freely sharing their dinner of aloo ka parantha with him, and keeping him awake for the better part of the night with their singing and joking. With all that, the visit to Mussoorie for a couple of days only, went off quite well, with excellent views of the great arc of Himalayan peaks from a point close to the villa where the Dalai Lama had been put up, shortly after his leaving Lhasa and Tibet in the wake of the Chinese occupation in 1959. If Delhi had appeared rather distant and cool to the events of that day, Prasad found on return to Calcutta after about another week or so, that things were quite different in the city. Ladies were hurriedly knitting pullovers for the soldiers; people were collecting food articles and warm clothing and bedding to be sent to the front in faraway Se La and Bomdila in NEFA. Rice, fish and meat, which were freely available till the end of September when Prasad had left for Delhi, had become hard to come by, and their prices had risen by 50 to 60% over the previous 60 paise and the three and half rupee per kg. mark respectively. This sudden spurt in prices had left people confused and anxious. They were quite prepared to put up with some immediate privation to ensure that the soldiers at the front had the necessary provisions. But, even when the Chinese withdrew from NEFA within a couple of weeks, and peace was restored, the price spiral continued. It was getting increasingly difficult for ordinary people to get by. In 1964, Jawaharlal Nehru, weary of his many battles to bring freedom and parliamentary democracy in a country that had known feudal exploitation and imperial dominance for ages and deeply disheartened

Going Back a Little 3

by the Chinese invasion, passed away. A vital link with the past, and the values that had guided the struggle for freedom was no more. Lal Bahadur Shastri, a diminutive person but withal a man of steel, became Prime Minister and, within a year or so, had to face an attack by Pakistan in April 1965 in the Rann of Kutch in Gujarat, and later along the western frontier. Once again, the country was thrown into the turmoil of war, with its toll of death, deprivation and anxiety. Shastri also passed away suddenly while at Tashkent, during peace negotiations with the Pakistan President. Following some interim arrangement, Mrs. Indira Gandhi became the Prime Minister of India in 1967. Gopalpur, on the road via Koikhali to Rajarhat and Bhangar lying to the north-east of Calcutta, where Prasad had shifted with his parents since some months, seemed a quiet oasis, being surrounded by extensive rice fields. The area had large ponds with their shoals of carp fingerlings, the koi and kholshey, dimpling the water’s surface as they came up for air or plucked at an insect. Even as the morning sun cast a gentle warmth, and the evening brought in its wake a soothing breeze that rustled through the banana and mango orchards, the people had hardly any respite from the rapid-fire inflation. In quick succession the price of rice shot up from 75 paise per kg. to a rupee, and then to a rupee and half, before settling at around three rupees in about a year’s time. It was the same with fish. Soon, even the supplies petered down—from the coppery-red large carp—favourite to the middle-class Bengali palate—to kholshey, punti, and baby tilapia for the rest of the four or five years that Prasad and his parents lived there. It was also then that they—together with other bheto-Bangalis who had known nothing other than rice as their main cereal almost since time immemorial—had to turn to taking wheat to supplement their food, perforce as sufficient rice was not available. Thus, chapatti entered the Bengali diet in a big way. The days of PL 480, under which the United States provided cereals under certain aid provisions to India, were well under way. Prasad had been in college then, studying Economics. But, for all the readings of Gardner Ackeley on macroeconomics, or J.W.L. Ryan on microeconomics, or Samuelson with his racy language and hard bits of

4 Eco-Yatra

theory, he was quite lost in trying to understand the turmoil that was directly and indirectly impacting their lives. It was true that the basic tenet of the theories of economic development that he had read of revolved around the issue of ‘jam today versus jam tomorrow’ that is, to endure some privations now to build a better life tomorrow. The books and reports made it look so simple and distant, as if these difficulties usually happened to other people. Inflation, unemployment, the steady sliding down of people with fixed incomes—these forces were swirling and surging all around them. His parents, having seen World War II and the Great Bengal Famine of 1943, remembered having passed through a similar phase some 20 years earlier, and knew in their heart of hearts that things would never be the same again. Prasad did retain some vague memories of the plight of refugees from the then East Pakistan some 10 to 12 years earlier, and the efforts that his parents had made to collect clothes and rations to take care of some of the refugees’ immediate needs. Were those dismal times again to be upon them? Their own demands were limited and basic, but still, they had to push and strain to make ends meet on the small government pension that Prasad’s father was entitled to. The extended family of grandmothers, uncles, aunts and cousins; the casual visits to and by relatives and friends; the Anurodher Ashor on All India Radio; the prabhat feri, or early morning processions on Independence Day with full-throated singing of songs made popular during the independence movement, such as Uthogo Bharata Lakshmi, Dhana Dhanye Pushpey Bhora, Sarey Jahaan Se Achha, or Kadam Kadam Badhaye Jaa; the easy enjoyment of jhal muri, phuchka and aloo kabli at the Lakes; the visits to the zoo; Sunday morning film shows of Francis, the Talking Mule, Tarzan, and of Laurel and Hardy.

All this seemed so different from the relatively easy-going life they had enjoyed for more than a decade while living near Gol Park in south Calcutta. The extended family of grandmothers, uncles, aunts and cousins; the casual visits to and by relatives and friends; the Anurodher Ashor on All India Radio; the prabhat feri, or early morning processions

Going Back a Little 5

on Independence Day with full-throated singing of songs made popular during the independence movement, such as Uthogo Bharata Lakshmi, Dhana Dhanye Pushpey Bhora, Sarey Jahaan Se Achha, or Kadam Kadam Badhaye Jaa; the easy enjoyment of jhal muri, phuchka and aloo kabli at the Lakes; the visits to the zoo; Sunday morning film shows of Francis, the Talking Mule, Tarzan, and of Laurel and Hardy; the carefree bus rides to school, joking with the conductors, who in all likelihood had children of school-going age back home in Bihar or Punjab. This slow-paced gentle life seemed to have provided a cocoon of comfort and security that had seemed quite impervious to change. It was true that since 1947, when the country was partitioned into India and Pakistan, there had been a sizeable influx of refugees from erstwhile East Pakistan into West Bengal, which had put considerable strain equally on the local economy and the state administration. But this had not noticeably impacted life in the city; except that one had occasionally, on way to catch a train from Sealdah station, seen the inhuman and pitiful conditions in which the uprooted people had to live on the platforms of the station, and in some spots fringing the area. Also, there had been replacement of the private buses with their Sikh and Bihari drivers and conductors in Calcutta around 1954–55 by the Calcutta State Transport Corporation established by the state government to enable a good number of Bengalis who had fled from across East Pakistan to have gainful employment. Calcutta seemed to have taken all that quite in its stride by expanding—albeit willy-nilly—towards the south near Jadavpur, and the colonies of Bagha Jatin, Netaji Nagar, Naktala, and also to the north, near Panihati and Kanchrapara, as also other places where large private estates and public spaces had been available and had been swiftly occupied. It had been largely left to Dr. Bidhan Chandra Roy, the then Chief Minister of West Bengal, and his administration to cope with the refugee influx and their rehabilitation, apparently with little help, and considerable casualness on the part of the then central Ministry of Refugee Rehabilitation. Some sections of the autobiographical My Reminiscences by Smt. Renuka Ray, and In the Path of Service by Smt. Ashoka Gupta clearly bear this out. Both these ladies, who were deeply

6 Eco-Yatra

involved in social service, had to confront a human tragedy of enormous proportions, and a day-to-day barrage of problems in providing relief to, and arranging for rehabilitation of the millions of refugees. From what Prasad had picked up from casual discussions between his father and his uncles and colleagues, Dr. Roy had simultaneously initiated measures to constitute the Calcutta Metropolitan Planning Organisation (later to become the Kolkata Metropolitan Development Authority charged with planning further development and expansion of Calcutta), and had planned and pushed for setting up of a satellite township at Kalyani, development of the Salt Lakes on the eastern fringes of Calcutta (to what was to become the Second City), bringing in the Durgapur Steel Plant to the state, establishment of the Damodar Valley Corporation for flood control and irrigation in central and south Bengal, setting up of the Indian Institute of Technology at Kharagpur, and the Indian Institute of Management at Calcutta, promoting a tourist centre at Digha, besides generally encouraging and inviting investment in industries in West Bengal. With all this Dr. Roy had also to contend with the post-World War II food shortages, and the simmering issue of refugee relief and rehabilitation. It seemed that many from the older generation were confused and upset with leaders of some of the main opposition parties of those days who had, since the 1950s, persistently called for rehabilitation of the refugees within West Bengal. They wanted them settled near and about in the rich agricultural lands of north and south 24 Parganas, Nadia, and Hooghly adjoining Calcutta, and opposed their transfer to other less populated regions in the hinterland. They had hardly pushed with the Union Government for adequate financial and administrative support for the proper rehabilitation of the refugees. Instead, they had focused on agitating against the state government, as if the latter was responsible for the partition of the country and its aftermath, and had the sole obligation for refugee rehabilitation. Little was discussed as to what was to be done for those who were already tilling the land in those areas, and how the excess land was to be found and allocated. This was by no means an easy task as Bengal had been

Going Back a Little 7

put under the ‘Permanent Settlement’ accord by the British Viceroy, Lord Cornwallis, since the 1790s, and an array of intermediaries had come up for collection of land revenue. Over the years, there had been fragmentation of land holdings, and tenurial rights between the owners of the land and the peasants who actually tilled it were complicated by a number of historical and social factors. Much had to be done, and in a short time. Besides settling the numbers that could be accommodated in and around Calcutta (as insisted upon by the opposition parties), steps were taken for rehabilitation of the displaced persons in some areas of Uttar Pradesh (now in Uttarakhand), and in Bettiah in north Bihar. Besides, the Dandakaranya Development Authority was constituted to rehabilitate large numbers of refugees from East Pakistan in parts of western Orissa and the Bastar region of Madhya Pradesh (now in Chhattisgarh). That a concerted action based on a common understanding of the refugee problem, and resolving it at the earliest— for human, social and economic reasons—was needed, and scoring political points could come later, seemed to have been given the go-by in those days. From his readings of the daily newspapers—a habit since his school days—as well as his classes in Economics in college, Prasad had come to know something about the policies of the party and the government, then firmly under the guidance of Prime Minister Pandit Jawaharlal Nehru, to build ‘a socialist pattern of society’, vaguely modelled on the ideas of Fabian Socialism once popular in England, and to which many Indian leaders, notably Nehru, had been exposed during their student days in the UK. The Congress Party’s Avadi Resolution of 1955, and the Industrial Policy Resolution of 1956 setting out the new social order and the pattern of industrial development in the future were the order of the day. The policy adopted by Lenin in the Soviet Union of the 1920s with the state assuming the ‘commanding heights of the industrial economy’ had also been set in motion in India. Government or semigovernment bodies were to provide the framework and the leadership to bring this about. A ‘mixed economy’ where, nominally, the public sector organisations and private enterprises were to co-exist and function in

8 Eco-Yatra

their respective spheres by supplementing and complementing each other in the production and supply of goods and services, was defined to a great extent by the government’s policies and procedures. As an integral part of this policy, Five Year Plans modelled on the approach adopted by the Soviet Union in the 1920s following the Bolshevik Revolution, had been instituted in India since 1952, when the First Five Year Plan had been launched. The great Bhakhra Nangal dam set up in Punjab had been hailed by Nehru as a ‘modern temple of India’, bringing hope of a new agricultural resurgence in northern India. So also was the Hirakud dam on the Mahanadi in Orissa, and the irrigation-cum-flood control dams set up at Rihand in southern Uttar Pradesh, and at Maithon, Panchet and Tilaiya on the Damodar river that wends its way through Bihar and West Bengal. Prasad had to study at college in some detail the new thrust to heavy industries––‘machines to build machines’––as given in the Second Five Year Plan (that commenced in 1957) drawn up by Professor P.C. Mahalanobis. He had also read with more than a passing interest the studies made in 1962 by Mr. Pitamber Pant of the Perspective Planning section in the Planning Commission that a certain degree of initial inequality in income was inevitable to provide a stimulus for economic growth, and that a minimum of 7% rate of growth would make it possible substantially to reduce the poverty levels in the country within a period of the next 15 years. Another major policy decision of the Government of India had been the institution of the ‘Freight Equalisation Fund’ with a view to promoting regional development, under which certain basic inputs such as coal, iron ore and steel—which were concentrated in eastern India— were to be made available at the same price in different parts of the country. The opposition parties in West Bengal did not appear at the time to be particularly concerned with this, and seldom spoke up against a central policy that at one stroke nullified the comparative advantage that the eastern states enjoyed in resource endowment, and the historical predominance of engineering industries in the region. On way back from library work at college, reading up on the Five Year Plans (the First Plan being from 1952 to 1957, the Second from

Going Back a Little 9

1957 to 1962, and the Third from 1962 to 1967), following the tutorials, or after watching movies, Prasad had been often stuck in traffic jams. There had been processions of people cutting across traffic junctions, carrying flags and banners, and shouting slogans for and against, cholbey na, cholbey na and ditey hobey, ditey hobey whether about a tram fare increase, or against the inflation or about enhancement of bonus (mostly just before the Durga Puja). There were heated public debates and discussions on how the government of the day was selling the economy and the country to the ‘Tatas and Birlas’ and (if anything was left over), to the Americans. There had been some communal riots in Calcutta—the one in 1964 had been particularly bad—and an undercurrent of unrest and dissatisfaction, stemming from the price spiral, unemployment and the general impact of economic and social change amongst people who had not really been quite prepared for them. It was true that many, if not most, people were able to get their requirements of rice, wheat, and sugar from the public distribution system—or the ‘ration shop’—run under a government scheme. There were persistent shortages, what with the diversion of land and resources for the war effort between 1939 and 1945, the partition of the country in 1947, and the growing influx of millions of refugees over the years. It is difficult to put a precise figure on the influx, which came in periodic waves; the border between East Pakistan and West Bengal was quite porous in those days, and many of the refugees put up with friends and relations to begin with; but a figure of 4.7 million has been given in some books. A paucity of foreign exchange precluded the large-scale import of cereals to cover the shortages. But the three years of travelling to college—sometimes riding on the rear bumper of the bus due to overcrowding—and the training between 1962 and 1965 in the National Cadet Corps, which had become compulsory for all college-going boys, with regular parades and arms drill with Lee Enfield rifles of World War II, had helped toughen up Prasad to an extent. The formal course on Indian and overseas economic history, the library work and the roughand-tumble of discussions, and the adda in the Indian Coffee House in Albert Hall on Bankim Chatterjee Street with its shafts of light through

10 Eco-Yatra

the high skylights and liveried bearers serving endless rounds of moghlai paratha, or chicken afghani and small cups of steaming coffee, had exposed Prasad to many new bits of information and ideas. The reports and discussions on the sharp drawing down of the Sterling Balances (which lay to the credit of India for its contribution to the war effort) in the immediate post-war period often dominated the adda. Apparently, at least to a section of the students, that this was due to large-scale over-invoicing of imports and under-invoicing of exports (Prasad had first to understand what these terms ‘over’ or ‘under-invoicing’ meant), was one such bit of information. It was a revelation to Prasad that there could be people who would be prepared to bend the law and the rules for immediate personal gains. His father had not done any such thing; nor had any of their neighbours and the larger circle of friends and relations. The other was the problem of ‘hoarding’ of commodities by some traders, often leading to shortages of requirements of daily life, and increase in their prices. This was another fact of life that had to be understood and accepted. It is perhaps a reflection of the time that it took Prasad some effort and much time even to believe—let alone accept— that ethics, scruples, conscience and all that, that had been drilled into him at school, in many cases had a minor role in decisions that some sections of businessmen took. The death of Dr. Bidhan Chandra Roy in 1962 seemed to have removed a father figure and a pillar of stability and consolidation, and opened the way for a strident political movement in Bengal that often turned bloody and seriously disrupted public life.

The death of Dr. Bidhan Chandra Roy in 1962 seemed to have removed a father figure and a pillar of stability and consolidation, and opened the way for a strident political movement in Bengal that often turned bloody and seriously disrupted public life. The sudden passing away of Pandit Jawaharlal Nehru, Prime Minister of India, in May 1964 made many people—including Prasad’s parents—sad and nostalgic, and in some imperceptible way (as

Going Back a Little

11

he realised much later) cleared the way for profound changes in the political, economic and social policies and set-up. In spite of these unfortunate developments, the time at Gopalpur, on balance, seemed to pass off reasonably well with some very nice neighbours, lots of greenery all around, and looking after the mango, custard apple and guava trees in the garden. As far as Prasad could recollect, this period of his childhood, and school and college-going days since the early 1950s till about the mid-1960s had been a period of relative calm, coupled with a good deal of confusion, simple pleasures and enjoyment changing places rapidly with deprivation, churning and change, and he was not to know then, a beginning regardless of towards what a modern and developing India was to look like.

Chapter

2

The Initiation

It always seemed to be happening to other people. Friends all around him fell in and out of love; but Prasad seemed to have been quite immune to the adolescent mooning about. The college graduation results were out by August 1965, and already a couple of college friends had found work; others were going in for higher studies in science or engineering, and some in management. He was growing up, and there were family responsibilities. The Indo-Pak war in the autumn of 1965 at the western borders had once again put the country through a certain degree of turmoil. And the sudden passing away of Lal Bahadur Shastri, the then Prime Minister of India, at Tashkent in January 1966 had also created considerable uncertainty in people’s mind so long used to the towering presence of Nehru and the reassuring touch of the Congress Party. Mrs. Indira Gandhi who had just been elected as the new Prime Minister was trying to come to terms with these issues and to provide a new impetus to growth and development. She was having her hands full, with the crop having largely failed in 1965 due to drought conditions, and the aftermath of the war.

The Initiation

13

Mrs. Indira Gandhi who had just been elected as the new Prime Minister was trying to come to terms with these issues and to provide a new impetus to growth and development. She was having her hands full, with the crop having largely failed in 1965 due to drought conditions, and the aftermath of the war.

Prasad was at cross-roads—part of him wanted to study further, while another part was all for taking a plunge into a career. His father’s pension, which at one time had seemed quite munificent and had seen through his sister’s marriage and his own college education, now appeared all too small to afford even a reasonably comfortable life. There were constant compromises to be made—in food, clothing, mode of transport. His father had long sold off the car, and had now to make do with bus, or a taxi on special occasions such as attending a marriage. Some of his readings in economics came back to Prasad. With fixed income and rising inflation, they had perforce to shift their consumption to what had been described in the text as ‘inferior goods’—from the bright red carps to the grayish black tilapia fish, from the refined atap rice to coarser siddha or parboiled rice, and to the cheaper but more available wheat (courtesy the PL 480 assistance from the US—particularly reviled in major political circles in West Bengal). He was turning 21, and it was time to look around and find something for him to supplement the family income and to chart out his own life and future. In 1965–66, industries in and around Calcutta were expanding and modernising, thanks to the huge government investments since 1957 under the Second Five Year Plan in steel, railways, irrigation, and so on. The jute mills, strung out along the Hooghly river that separated Howrah and the western hinterland from Calcutta, had overcome the initial impact of losing much of the raw jute growing areas to East Pakistan following the partition, and were expanding and improving their operations. Established and well-known names in the engineering industry, such as Jessop & Company, Braithwaite & Company, Burn & Company, Guest Keen Williams and others were reaching the very peak of their production and development. The names of large business houses like Bird &

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Company, Macneill and Barry, James Finlay, Macleod and Company, Balmer Lawrie, Duncan Brothers, Jardine Henderson, Andrew Yule & Co., Gladstone & Lyall, Turner Morrison, etc., were still writ large on brass plaques set on their nouveau Doric and ‘Calcutta Baroque’ style buildings that stood along the Netaji Subhas Road (once Clive Street), the commercial heart of Calcutta, and possibly of a very good bit of eastern and north-eastern India as well. No doubt there was sizeable unemployment and dissatisfaction amongst the educated youth as they had considerable difficulty in landing jobs. Things were particularly difficult for the refugee families from East Pakistan—they had to find shelter, food, and a source of income other than that from agriculture and small trading businesses to which they had been accustomed for generations. As far as possible, the government tried to get them absorbed in some state undertakings such as the Calcutta State Transport Corporation, Rehabilitation Industries Corporation, and so on, besides its various wings. Many functions of health, education, agricultural development, irrigation, power supply, etc., were in the hands of the government and were undergoing substantial expansion. Jobs could thus be had on compassionate grounds, of being a displaced person. But Prasad was not eligible for this; his family having come to Calcutta and settled down much before the partition. Posts of clerks or junior assistants in an office were often provided on the basis of sifarish, or pleading on grounds of compassion and loyalty, the father or the elder uncle of the candidate having already served there for 30 or 40 years. Prasad found that this was practically debarred for him because of social and economic considerations; all his relations had either served in government or in a good post in private companies. At the same time, he found that the more enterprising section of youth other than Bengalis were able to strike out on their own into services such as brokerage, agency or distributorship, or into small businesses. He could hardly get any information on such opportunities or openings as none of his relations had any experience of getting about in this field. Then there were the so-called ‘covenanted’ staff, as Prasad had learnt, inducted into major business houses who came from well-known families, dressed and spoke well, or could otherwise fit into the rarified air of business lunches and

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cocktail parties that seemed so important at that time for high-level business decisions. Then there were the so-called ‘covenanted’ staff, as Prasad had learnt, inducted into major business houses who came from well-known families, dressed and spoke well, or could otherwise fit into the rarified air of business lunches and cocktail parties that seemed so important at that time for high-level business decisions.

So, in keeping with family traditions, Prasad looked around for a job. There were regular advertisements by companies, but more for professionally qualified persons such as engineers or chartered accountants, and the like. Prasad had no such qualifications, and so that narrowed the options considerably. Still, he felt he came from a reasonably decent middle class family, spoke and wrote well, dressed reasonably and so, possibly, had as good a chance as any one else of getting a good job. There were the banks taking in probationary officers in good numbers, and openings were coming up in the public service commissions that had been constituted by the government to induct persons into public administration at various levels. Money and security were both prime considerations in the employment and, looking around, it seemed that most banks, government organisations, and some of the better private companies did offer both. Another factor that also weighed on Prasad’s mind was that the job would preferably be centred in and around Calcutta. He had spent much of his youth in Calcutta, and had most of his friends and relations there. He was somewhat wary to start off afresh in Delhi or in Bombay. They were already more expensive than Calcutta in terms of living costs, and it seemed so much of a bother to set up a new establishment just for one person that may not be compensated adequately by the additional money or opportunities. Alternatively, one had to stay with a relation already settled in those cities, or in a mess—as most Bengalis outside the state in fact did—for a year or two before going on to have one’s own set-up. Most of the private firms in those days paid about Rs. 400 or Rs. 450 per month to officers. The major banks gave about

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Rs. 500 or Rs. 550 to probationary officers, and members of the all-India services like the IAS received about Rs. 600 per month. One of Prasad’s cousins who had done engineering was started off as a trainee at Rs. 600 per month. That just about set the limits within which Prasad would have to work things out for himself. Writing a decent bio-data (or curriculum vitae as it was known in those days when some of the missionary schools in Calcutta offered Latin as an optional language) was the first step to ‘market’ himself, as Prasad found. It was completely a new sensation—to ‘package’ oneself, rather like a packet of breakfast cereals or tube of toothpaste. Should he give his father’s full designation, or just mention that he was a retired government officer? Should he give his school leaving certificate examination marks in detail subject-wise, or just the aggregate marks, and the grade? His father was no help for he had never prepared any bio-data, and had entered government service in the 1920s shortly after doing his engineering degree abroad—Glasgow had been the place to do it then (although the home grown Sibpur Engineering College had been there for some time). The Banaras Hindu University had not come up then. Some of the elder cousins who had found employment in the 1940s in private firms gave some leads—don’t make the CV too long; or the bosses would not go through it; don’t make it too short or they would feel you really have little to offer in terms of knowledge and skills. Stretch here, and cut and chop there till the CV becomes a fairly decent two-page document. Then, just bung it in straight to the companies or those who more coyly give just box numbers. Strange as it seemed to Prasad himself, he got about three to four calls over the next two or three months. There were borrowings of a dark jacket and tie (usually of St. Michael’s of London, for ties were not made in India in those days) from one of the elder cousins, walking into unfamiliar offices, getting into lifts, showing the interview letter to the peon and then to the secretary, and politely being told to wait—always to wait, sometimes for 15 minutes, sometimes for over an hour. The interviews also varied, from a quick 10 minutes to a more leisurely half an hour; sometimes with one officer, sometimes with two in succession,

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and even by a board of four or five members. Prasad was getting into the spirit of the thing—how to say ‘good morning’ cheerfully when butterflies in the stomach just would not stop fluttering, wait to be asked to sit, and then swiftly draw up the chair and sit down with an eager and expectant look pasted on the face. Sometimes the interviews went well, sometimes rather poorly. In one case he was asked to report for a further interview in Delhi—the cost of first class rail fare was duly reimbursed, but the problem had been to put together the funds for buying the tickets in the first place. There were group discussions, team projects during the course of the day, and being short-listed with three others for the final interview at the end of the day, and then “Thank you for coming. We will get in touch with you later”. In the meantime, Prasad had enlisted at one of the ‘coaching’ classes then available for quick brushing up of Indian and European History, and Economics and English Literature that were a popular combination of the time for admission into the Union Public Service Commission. One could try to get into the all-India services like the Indian Administrative Service, the Indian Police Service, the Indian Revenue Service, or somewhat lower down in the ‘pecking order’ or the Union Civil List as it later transpired, into the Indian Postal Service, Indian Cantonment Service, Indian Defence Accounts Service, and the like. It puzzled Prasad then as to the proliferation of government services (and still seems a little beyond him) and why defence accounts could not be dealt with by the Indian Audit and Accounts Service, or the Indian Cantonment Service by the junior level officers of the IAS, or even by staff of the Central Secretariat Service. A couple of his college friends were also in the fray for the UPSC exams, and it was nice that they could prepare together and compare notes. The State Bank of India by this time wanted to induct probationary officers with a starting salary of Rs. 550 per month. Prasad duly submitted his application and sat for the all-India examination—the first time he came across an ‘objective’ question paper, with numerous small sums, filling in of blanks, choosing amongst different optional answers and so on, all to be finished within a time limit of two hours.

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Around this time, a relation of his mentioned about a possible vacancy in a leading chamber of commerce in the city. Prasad was not clear as to the sort of organisation a ‘chamber’ was, or what it did, but his uncles (a few of whom had served in senior posts in some of the well-known business houses), and his elder cousins seemed quite taken up by the opportunity this offered. It was thought well of because it had ‘sahibs’ working there, and enjoyed a reputation as a fine institution amongst government and commercial circles. So Prasad sent in the usual application: “Understanding from a reliable source that your esteemed organisation has a vacancy in which I believe that I would be of service to you”, etc. In about a month’s time, he got a bland letter from the Eastern Chamber of Commerce and Industry acknowledging his application and requesting him to appear for a written test. This took place with seven other candidates, sporting quite a smart coat and tie even at the exam—sort of ‘to catch the eye’ as it were. The Chamber office, which lay to the north of Dalhousie Square and a short distance from the Writers’ Building or the state secretariat, was an imposing structure in red brick and grey granite with arched windows, separated by fluted columns headed with elaborate capitals. As a building it was impressive enough, and the smart ex-Gurkha Regiment durwan with his three rows of campaign ribbons on his chest, cocked felt hat and khukri by his side seemed at one with that rather grand building. Inside, finely crafted Venetian blinds over the windows provided shelter from the sun, and an antique lift worked in its cage of wrought iron provided not a very satisfactory option to visitors to pass up the grand marbelled staircase that arched up from the ground floor. The examination, which basically comprised two essays—one on a topic that had been already intimated in the letter from the Eastern Chamber, and the other on an ‘unseen’ subject, did not seem particularly difficult to Prasad. At the same time he was anxious to know if he would get an opportunity at the Chamber as the interview for the State Bank probationary officers was likely in another couple of months, and the UPSC exams, which were to take place in four months, were hanging heavily on his mind. Shortly afterwards, he appeared for an interview in

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a private firm and was offered a salary of Rs. 450 per month! For some time he was torn between taking up this offer immediately, and hang the consequences, or to stick it out for some more time in the hope that the State Bank interview would come up, or the Eastern Chamber would make an offer. He decided to hang on and, soon enough, in March 1966 he was called to an interview at the Chamber. The peon to whom he had shown the interview letter led him through a labyrinth of passages—most commercial offices of the day, as he was later to find out, had this tendency for winding passages, up one staircase and down another approach, as if the offices had been set up anyhow over time— as indeed many of them had been. As he waited at a table, uncomfortable in his borrowed jacket—the sleeves seemed to hang too long—and the tie too tight round his neck, he saw a new world—a world of highceilinged halls, fans strung down on long pipes, their blades setting up a whisper of breeze, the brown, teakwood racks of files—files far more than he had ever seen or could have thought to have existed, and ‘babus’ in dhuti-panjabi poring over their desks, scrutinising, writing, filing. From time to time, a liveried peon would dash past carrying a cup of tea or a glass of water to one room or the other. After a short while, Prasad was called in to one of the rooms. The person—a sahib—looked up from his file, set down the fat fountain pen with which he was writing on a file, and bade him to sit. He was the Deputy Secretary (Actg.)—no name—who, with a wide swirl of a signature had signed the interview letter. He was Douglas Parrish— Douglas Macniece Parrish, as Prasad was to know later. A thick palm was extended by way of a handshake—though perfunctorily—and a gravelly voice redolent of Glasgow and Dundee, without even the grace of wishing him ‘Good morning’, went straight into a discussion of some of the points that Prasad had given in the essays at the exams. Seemingly satisfied, the interviewer leaned back and lit up a cigarette with a gesture that was all quick for a person of his bulk, and in a more leisurely fashion went over a few points of the CV, particularly the persons in the commercial world who had been mentioned as references. At the end of it came an ‘Ah’, with the eyes raised in contemplation at the slowly

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rotating fan in the ceiling. “Ah, we may be able to offer you a position as a trainee secretarial officer. The salary would be Rs.750 per month. But this would be finally decided by the Secretary, and we will be getting in touch with you again after some time”. Prasad had that sinking feeling in his stomach on hearing once again the dreaded phrase, ‘After some time’. Time was something he did not have in hand. A salary of Rs. 750 per month was higher than what he was likely to get to begin with in the SBI, or even under the UPSC, and he would have to decide soon. What if the SBI interview materialised earlier, and he was successful? Should he immediately take up the probationer’s post in the SBI, or hang on for some time for a firm offer of posting from the Eastern Chamber, or should he throw up everything and just go ahead with the UPSC exams later that year? Prasad was constantly racked by these thoughts and doubts. On one hand some in the family, including his mother, felt that he should just go for the UPSC and take up whatever was on offer. Strangely enough—now looking back—it hardly crossed Prasad’s mind to take up a job that came up first, and then to leave it if a better offer came up later. Such a course of action seemed to smack of opportunism, and that seemed at odds with the traditions of loyalty in the family. His elder cousin and his uncle suggested he should take the Chamber job if it came through, while some others felt that the SBI would be a good career. In his own mind, Prasad was beginning to get the feeling that while a UPSC posting would bring security, money and a good deal of prestige and position, there were already quite a few stories doing the rounds about how even the IAS officers had often to kowtow to the political figures, and on quite a few occasions compromise their positions. Would he like to do that? Coming from a decent family, and having had a good education in the course of which he had been trained to weigh and judge an issue honestly. Prasad was becoming increasingly uncomfortable with the idea of going through with the UPSC. His mind was made up for him within the next fortnight, when he received a letter from the Secretary of the Eastern Chamber asking him to appear for a further interview. His progress into the innards of the Chamber was even more swift this time, with even the liftman saluting

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him—or perhaps the interview letter which he produced—and escorting him to an anteroom where a female personal secretary sat quietly and efficiently typing out a letter. She greeted him and bade him to sit in a chair, a huge leather-bound affair into the depths of which Prasad sank with that peculiar sinking feeling one has at interviews. In a couple of minutes, the secretary led him into a huge cavernous room that had a secretariat table practically the size of a billiard table (and likewise covered with bottle-green felt) from behind which rose a person who looked as if he had once been part of a high cliff-face. This giant with a face so florid that it looked quite purple offered a firm but not a bruising handshake, led him to a side table, and shot out questions in monosyllables—name, father’s post, school, education and, again, the references. He seemed particularly interested that Prasad’s father had done his engineering degree in Glasgow. By this time a tray of tea and biscuits had arrived, and the giant watched shrewdly with his light blue eyes under a wedge of a brow as Prasad fumbled in his instruction to the teaboy who had brought it in—no milk, yes milk, sugar? yes, not so much, and had a biscuit bit by bit without popping the whole of it into his mouth, and without dipping it into the tea as was often the practice in Bengali homes. Prasad did not know how he lasted those 15 minutes in the company of that giant, his brain reeling from the monosyllabic questions thrown at him—half of them coming out garbled from behind a hedge of thick moustache, and with those pale blue eyes boring into him. Then it was over. The giant rose, blocking out the light coming in from the large windows behind him, and shook hands again and retreated to his lair behind that great slab of a table. The liveried peon, who had so long been hovering near the door, made it easy for Prasad by motioning him out, which he somehow managed without stumbling, for his knees had practically frozen with fright. In about a week the letter of appointment followed, as a probationer secretarial officer with a starting salary of Rs. 750 per month. Prasad dashed off a letter to the UPSC asking for refund of his exam fees, and tore up the SBI interview letter that came another 10 days later. It was May 1966.

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On the first day in office, dressed in the ‘de-rigueur’ white ‘makhan gin’ trousers with buckles—no belt, not done, “not a durwan, are you, dash it!”—a decent tie practically choking him, black oxford shoes, and a biscuit-coloured jacket, Prasad took his position in a section of a large hall with two other officers, and three clerks. The other side of the hall was taken up by a sprawling sea of typists who clattered away at their typewriters all day, fuelled by copious amounts of tea. He was introduced by one of his fellow officers to the clerks—Sudhir babu, Deben babu and Mondal babu—the last being possibly the most senior clerk in the office, could be addressed by his surname only. Then it was Prasad’s turn to meet Mr. Shukla and Anil Sarkar who husbanded the Chamber’s reference library with its large stock of government reports and bound volumes of The Statesman and the Financial Times. Then, down the staircase to the ground floor, to be formally introduced to Mr. B.N. Chatterjee, the Accountant, who presided over his empire of four assistants and numerous accounts clerks and peons. Also on the ground floor was the Despatch Section, under Mr. Oliver Peters, an AngloIndian assistant, and Satikanta babu, a senior clerk, each with his own retinue of clerks and peons. Then, also on the ground floor, he was taken to meet Mr. S.K. Basu and Mr. Ronald D’Costa who were looking after the Legal and Arbitration Sections. On the second day, it was up to the third floor to be introduced to Mr. N.K. Dutt, the Labour Adviser, and his officers, and to Mr. R.C. Downey, an elegant looking expatriate in charge of the Jute Mills Department, and his officers; Mr. A.K. Maclaren, in charge of the Mining Department, a bluff expatriate whose everpresent pipe stood in the way of intelligible conversation; then down the stairs, again to the first floor where Mr. A.C. Tait and his band of officers and clerks were looking after the Shipping Department. and then to meet Mr. W.B. Robson, a short, jolly and portly expatriate, with thick glasses, Mr. Brian D’Cruz, an Anglo-Indian assistant or, more correctly, as Prasad learnt later, an Eurasian from Goa, and another band of clerks who were supervising the Tea Department. These introductions, and browsing through the annual reports of the Chamber with their annexures of major correspondence (or

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‘representations’ as they were called) with the government, took up most of the time for the next week or so. Browsing through the Gazette of India and the Calcutta Gazette, published each day respectively by the central and state governments, which seemed to govern much of human activities, including commercial activities with their respective “Whereas the President of India is pleased” and “Whereas the Governor is pleased in the public interest so to do, now therefore…”, and marking off the portions of notifications that seemed relevant to running of business, was the be-all-and-end-all of Prasad’s induction into the mysteries of his job. Prasad had been in the habit of reading at the college library and it was no chore for him to go through the large numbers of papers, notifications (had there been any notification of the Plan documents?) and reports. It was however beginning to dawn on him that there was more to commerce and industry than the “Approach to the Third Five Year Plan” (just out), projections of investments in agriculture, industry, of education, financial allocations, and all that emanated regularly from the Planning Commission.

Chapter

3

At the Deep End

In the initial week, Prasad had it relatively easy—leafing through some of the files and reports, and generally settling in. One had to enter the Chamber with the jacket on, but one was permitted, with the onset of summer, to take it off and put it up on a hanger on the wall behind. Tea would be served once in the morning at about 10 a.m., and again in the afternoon at 3 p.m. with mechanical regularity; drinking water was also provided with a similar mechanical precision in a glass that had a red, padded, cylindrical cover to keep it cool; the fans overhead creaked with tiredness; the khus-khus curtains over the large windows were sprayed with water in the morning and afternoon to keep the rooms cool, and the lights provided a soft glow to read the files by. The files seemed to have a life all their own, with a birthday, adolescence, maturity and, finally, hibernation—or worse, death. They lay tethered to hard board covers with neatly written titles, somnolent in massive squadrons, stack after stack. Lunch was served in the dining room on the ground floor, where officers— including a probationer like Prasad—sat down at long tables and were served a fairly decent three-course meal beginning with a soup and ending with a caramel custard or bread pudding, with the juniors mostly having to go first at 12.30 pm, and the seniors mostly going in at 1.30

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p.m. It took some time to locate the washrooms—not because Prasad had not been shown them, but because of the approach through a number of criss-crossing corridors. They seemed to be on the lines of a good hotel with deep basins to wash hands and faces in, cubicles with commodes and the like. There was even one section of the washroom with a shower and a bathtub, for the burrasahib, should he be inclined to have a soak after a morning’s hard riding at the Tollygunge Club, or in the Ellenborough grounds before taking up the day’s work. Prasad learnt early on to look the other side if any senior expatriate officer should be using the washroom at the same time—obviously their bodily functions were of a superior order and could not be made the subject of public attention. This was done by the relatively easy expedient of elaborately drying one’s hands with the small towels that had been hung up against small name plaques for each of the officers, and taking time to comb the hair with special care. Prasad learnt early on to look the other side if any senior expatriate officer should be using the toilet at the same time—obviously their bodily functions were of a superior order and could not be made the subject of public attention. This was done by the relatively easy expedient of elaborately drying one’s hands with the small towels that had been hung up against small name plaques for each of the officers, and taking time to comb the hair with special care.

Prasad was once or twice in the first week sent on chores by the burrasahib, the Secretary, resplendent in a grey pin-stripe suit with a carnation in the button-hole, with dispatch boxes of files to be seen and signed by the President of the Chamber. The President, whose office was about a furlong away, reciprocated with a charcoal-grey pin-stripe suit, and also a carnation in the button-hole. Prasad dreaded those barked monosyllabic instructions, though, fortunately, the private secretary who had to bear the brunt of it day in and day out, deciphered them for him, and he was able to carry out the job without having the complication of an early nervous breakdown. Browsing through the annual reports and the files, to get an idea about the functions and activities of the Chamber, it seemed to Prasad

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that representations to different state and central government authorities on various industrial policy issues and tax matters that were of immediate concern to the member-companies, predominated. There had been severe criticism of the Second Five Year Plan because of overwhelming weightage given to investment and industries in the public sector—for the Government had adopted the concept and thrust of Five Year Plans introduced earlier in the Soviet Union. But then, the Chamber’s interest had been centred around other, more immediate issues. With only a passing deliberation on the Third Five Year Plan (which had commenced in 1962–63), principally on the broad contours of its financing policy, it seemed to Prasad that the Chamber was not giving attention to aspects of building up the rural infrastructure, employment generation and so on, that he had been taught in college to give stress on. There was an awful amount of work done in the Chamber on income tax, sales tax, excise duty, industrial licensing, labour laws and the like. All this was a far cry from the heady heights of monetary policy, fiscal policy, capital-output ratios, the Harrod-Domar model and the Mahalanobis model of planning, the marginal propensity to consume, and the like that had occupied Prasad for the preceding three years in college. A Five Year Plan, it had then seemed, proceeded on an elegant ‘approach paper’ detailing certain underlying notions and data on capitaloutput ratios, population and employment growth, balance of payments, sector-wise financial outlays on irrigation, power, health, education, transport and so on, and—hey presto!—economic development would emerge from the other end of the pipeline! At best, one discussed the estimated and actual outlays and the physical targets of agricultural and industrial growth achieved over the plan periods, the production function, and at a pinch, some inter-sectoral price and income elasticities. And that was that. It appeared that it was the provisions of these statutes that primarily lay at the back of private investment decisions, and the investment plans in the Five Year Plans drawn up by the Planning Commission were supplementary to this.

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Now it seemed that there was a good deal more to investment and economic growth than what was written about in learned papers and research documents, quite beyond the capital-output ratios, sector-wise outlays, block development offices, and even the weighty deliberations of the National Development Council that vetted the successive Five Year Plans. Investment, at least that which relied on private enterprise—and the Five Year Plans did provide for such—seemed to rest quite heavily on the Companies Act 1956, the Industries (Development and Regulation) Act 1951, the Capital Issues Control Order, the Income Tax Act 1961, the Central Sales Tax Act of 1964, the Foreign Exchange Regulation Act of 1947, the Import Trade Control Regulations of 1948 and even the earlier Bengal Sales Tax Act of 1944, and other bits and pieces of legislation. It appeared that it was the provisions of these statutes that primarily lay at the back of private investment decisions, and the investment plans in the Five Year Plans drawn up by the Planning Commission were supplementary to this. The Companies Act weighed about two kgs, and ran to more than 500 sections, while the Industries Act was far lighter in weight but far-reaching in its impact, with its prescription as to which industries would be the exclusive right of the public sector (that is, with wholly government ownership); those which could be set up by both government and private enterprise, and a long list of products that were reserved for production only by the small scale industries, that is, those having capital investment below a specified level as modified from time to time. Licences had to be obtained from government to take up manufacture of any of these items, and the application forms annexed to the Act ran to several pages, and were themselves in the nature of mini-project reports that seemed to Prasad to require far more particulars and data than any individual entrepreneur normally had access to. The Income Tax Act was of course in a class by itself with its forest of definitions, sections, sub-sections, clauses, provisos, and explanatory notes, where any ordinary person would very easily get lost in. The import trade regulations, as enshrined in the “Red Book”, provided for control of imports and exports, and imports especially could only be made against specific licence issued by government on the basis of a

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detailed application, with a corresponding allocation of foreign exchange held by the Reserve Bank of India. It took Prasad some time to adjust his thoughts to these new aspects and pre-occupations. All this seemed light-years away from the cutand-thrust of the articles on economic policies in India that he and his classmates had eagerly read in the columns of the Economic Weekly (renamed as the Economic and Political Weekly from 1966), edited by Sachin Chaudhury, and which provided such a fertile ground for debate and discussion. Now, other journals and magazines were “de rigueur”—not that the EPW was neglected—in the Chamber’s library. They included The Economist (published from London, but which the burra-sahib and Mr. Parrish monopolized for at least a month before it came out of their rooms), the Capital, then edited by Dinesh Bahl, the Commerce, edited by Vadilal Dagli, and the Eastern Economist. Amongst the newspapers, there were the Hindustan Standard, the Economic Times, the Financial Express, and of course the Financial Times (also from London), which was a great favourite with all the expatriate staff, who read it one by one, going down the pecking order. Without doubt, these magazines and newspapers—and of course the gazettes— provided more than adequate food for thought, provided Prasad could tear away an hour or so from his regular correspondence, drafting, attending meetings and all that. The issues of licensing and licences, and tax rates for specific items were a major preoccupation of industries in the private sector, which comprised the membership of the Chamber, and appeared considerably to influence their investment decisions and functioning, at least as much as the pattern of public investment prescribed in the Five Year Plan. Even the senior executives at the level of general managers and directors, despite the occasional glance at the Plan papers and the public investment pattern that may make or break their own industries, were seriously taken up by the levels of personal income tax, and more particularly about the “perquisites” by way of allowances for “malis” or gardeners for maintaining the company lawns and gardens, soft furnishing of the bungalows, and the like. All this was a far cry from the elegance of the

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marginal propensity to consume, the national income accounting, the income elasticity of direct taxes, the regressive nature of indirect taxes, and the comparative advantages of factor endowment and productivity and all that, over which Prasad and his professors had devoted so much time and effort while at college. What he was now reading from the Chamber files and reports provided completely another dimension to the process of economic decision-making and investments. There were so many things to be taken care of, so many permissions and licences to be obtained, registrations to be sought, so many forms to be filled up, so many returns, inspections, assessments, and so on, before any business or industry could run or take up fresh investments. Apparently many of these laws and regulations were a fallout of the disruptions that World War II had brought about, due to the overall war effort and, in particular, the Burma campaign against the Japanese, which had been a direct and major strain on the economy. They were also a corollary of the resolution on bringing about a “socialistic pattern of society” that the ruling Congress party had adopted at its conference in Avadi in 1955, and the concomitant “planned development” on the lines as adopted in the Soviet Union. This had largely guided the overall strategy and thrust of the Second Five Year Plan, which had been set in motion in 1957. Before he could get a hang of things, and within about a week of his joining, Prasad was taken by Mr. Parrish to a meeting of the Chamber’s Income Tax Sub-Committee. This was considered to be one of the elite sub-committees of the Chamber and counted amongst its members some of the finest professional and legal brains of the day in the eastern region. In spite of having looked up the proceedings of the Sub-Committee for the past couple of years, Prasad found that he was hardly able to follow the discussions. This was because more than one person spoke up on occasions, some mumbled the points they were making and, finally, there was the esoteric section so and so, sub-section this, clause that, and proviso the other, that went quite above his head. Over and above that, Prasad was immensely distracted by the pence-nez that one of the members— an Englishman of particularly livid complexion—wore, that bounced off his nose and was firmly pressed back, only to bounce off again after a

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short while. All that he could make out—because the terms came up again and again—were depreciation allowance, and allowances for “malis” for maintaining gardens, and provisions for soft furnishings. Depreciation he could understand and, by extension, depreciation allowance, but this allowance for “malis” seemed quite beyond him. Anyway, he somehow got through the meeting, and Parrish who had been taking some notes himself in some squiggly fashion—Prasad later learnt that this was in “shorthand” of the original Pitman version that he himself had to pick up in the next couple of months—growled out that Prasad had better get on with making the minutes of the meeting. Prasad had seen the general format of the minutes from the Sub-Committee files and so set to, trying to figure out the sections, sub-sections, clauses, provisos and explanatory notes, and what the Sub-Committee members had actually said. It was heavy going, with constant cross-checking with the Income Tax Act and worse, the Income Tax Rules, and of course previous SubCommittee minutes, and it was three or four days before Prasad could get his handwritten minutes typed out and submitted to Mr. Parrish. By that afternoon he got the response. By a superhuman restraint, Parrish managed to snarl out—without actually going in for a neck-throttle— that the draft was rubbish, just rubbish; inattentive, lack of application and the like, and in a small gesture that he allowed himself, threw the file across the table and let Prasad escape in one piece. The minutes that Mr. Parrish then produced within the course of the day were a model of clarity and simplicity—to the extent the Income Tax Act and Rules permitted this. It seemed to Prasad that Mr. Parrish had raised writing of minutes to the level of high prose; one could even say literature. The “Grow More Food” Sub-Committee, after another fortnight or so, was much, much better—the issues were simpler, the members were articulate, and there was no distracting pence-nez. It was more about good seeds, availability of fertilizers, and cultivable land within factory premises, for the Chamber members were making an effort to overcome the food shortages and the general privations following the drought the previous year and the war with Pakistan in the autumn of 1965. Vegetables, onions, and even rice were grown on the vacant land inside

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factory premises owned by the member-companies and were distributed free of charge to factory workers, and in the local markets. It did not add up to much, but as Prasad learnt, it was the effort, however small, that counted. This time his minutes, with some corrections, passed muster. The next couple of Income Tax Sub-Committee meetings and the writing of the minutes passed off without much ado. The correspondence with member-companies also threw up the serious concerns about the thinking in government on what was considered to be growth of monopolistic tendencies in the economy. Already, a Monopolies Inquiry Commission had been constituted to look into the growth of such forces in different sections of industry. Of course, as dinned into Prasad and other students in the undergraduate classes on “micro-economics”, monopolies were not good things to have, as they tended to distort the market, and earned “super profits” at the cost of the consumers. The deliberations of the Commission seemed to indicate that it was inclined to determine the existence or otherwise of monopolies according to whether a particular industrial house exceeded a predetermined sales turnover, rather than relating the monopoly, if any, to the market share for a specific product, and to the “super profits” that may have accrued. Somehow, in the debate, it seemed to Prasad that sufficient importance had not been given to the fact that since 1951, and more particularly since 1956, industrial growth had been dictated entirely by government through the industrial licensing mechanism, capital issues control, foreign exchange allocation and so on. Therefore, monopolies, if any, that had in fact emerged over the preceding decade were as much due to government policies as to any deliberate attempt on the part of some industries or industrialists to function directly or indirectly as monopolies. Nonetheless, these deliberations served to keep the industries on tenterhooks, and had the effect, if anything, of leading to deferment of investment decisions. To the common man, however, these academic discussions on growth of monopolies had far less significance than the bread-and-butter problems of making ends meet with the ongoing price spiral, and holding on to their jobs without going under in the troubled times.

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Just when his work seemed to be settling down with drafting of letters in reply to member companies, finding some references in the library, or acting as the general factotum for senior officers, there came the sudden decision on 6th June 1966 by the government to devalue the Rupee at one stroke by 57.5%. The exchange rate of the Rupee, which had been previously fixed at around Rs. 4.96 to the US Dollar, went over to about than Rs. 7.5 per Dollar. So far as the theories written of in the books were concerned, a devaluation of a currency was a correction for domestic cost inflation, as also persistent imbalances in inward and outward foreign exchange flows leading to a balance of payments crisis. There had been no crisis as such, although the country faced shortage of foreign exchange because of the massive investment and industrialization policy adopted during the Second and the Third Five Year Plans (which commenced in 1957 and 1962 respectively). It seemed that following the Indo-Pak war of September 1965, when, at one stage the Indian Army had reached the gates of Lahore, overseas donors and investors, especially from the USA just held back the funds they had committed to provide India. This made the financing of the Plan, which depended on an element of overseas aid, vulnerable. Negotiations had opened with the International Monetary Fund and the World Bank for fresh flow of funds and, according to most reports of the day, the IMF held out for a devaluation of the Rupee to correct the imbalances and promote exports before aid could again start flowing. But, as subsequent events showed up, this foreign aid did not really increase in any noticeable way; in fact, there were repeated postponements even of committed aid. There was a great to-do, as the companies, the Chamber and the managerial staff were thrown into a great turmoil—import licences and foreign exchange entitlements that they had in hand were at one stroke reduced by more than half. On the other hand, any and all liabilities such as payment of royalties or dividend in foreign exchange to overseas technical collaborators or shareholders rose in similar proportion in rupee terms. Each Pound Sterling, which earlier was exchanged at around Rs. 5, now required to be covered by Rs. 7. The entire expatriate community —and even in 1966 they were present in good numbers—whether

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in the tea gardens in north Bengal or Assam, or in the jute industry closer at hand, and of course as senior executives of the managing agency houses—was thrown into turmoil as the value of the expatriates’ assets, such as provident fund accumulations held in India, or the pensions they were entitled to by contract had also been slashed by the devaluation. The other apparent objective of the devaluation, that of encouraging exports from India by making them cheaper in terms of overseas currencies, also did not yield any immediate results, as the overseas demand for many of the items, such as tea, jute and jute products, coal, mica, shellac, and minerals and so on, were not particularly elastic relative to prices. In any case, the supplies of these agricultural and mineral products were not elastic in the short run. The issue of press notes by government, and of circulars by the Chamber, letters from member-companies on the devaluation and its impact rose to a crescendo. There were even alarm signals about a possible de-monetisation of certain denominations of the Rupee, that is, a fifty or a hundred rupee note may not be used any more as legal tender in the country. But that panic passed. But what did not pass, but rather seemed to become more accentuated, was the rate of inflation. Oil seeds, crude oil, industrial raw materials and items of plant and machineries that had to be imported from abroad to meet the country’s needs also became more expensive. To the extent that other countries themselves faced, for one reason or the other, some inflation of their own only added to the escalating prices. With increase in the cost of fuel, transport charges had to be raised, and that in turn led to severe public agitation, which at least in West Bengal turned quite violent, with burning of buses and resultant clashes between the police and the agitators, and ultimately bloodshed. At this time, the average salary of a typist or a clerk—and there were many of them in each office—did not exceed Rs. 300 or Rs. 350 per month, and that of a junior officer in those days did not much exceed Rs. 700 per month. Pensions at the state government level were around Rs. 500 to Rs. 600 per month, and even for central government secretary-level officers, it was about Rs. 1200-1400. Even the government was not spared as the foreign exchange component of the Third Five Year Plan towards plant

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and machinery, and of imported crude oil and other raw materials, besides payment of interest for overseas loans rose steeply. These abrupt changes also led Prasad to know about another important feature that would come to haunt him and many others, including many chief executives of companies in later years—the issue of variable dearness allowance, or VDA as it was commonly called. This measure had been introduced by government and largely accepted by the industries since the World War II, when there had been a sharp price spiral, to provide an element of relief to salary and wage earners to offset the price increase. Basically, this was based on the principle of neutralization of the price increase so that no one was at least nominally worse off than before. This was done by a process of adjustment of the VDA upward or downward once every quarter by factoring in calculations by the government through its Labour Bureau at Shimla of certain indices such as the Middle Class Cost of Living Index and the Working Class Cost of Living Index relative to the prices prevailing in 1949, the base being updated every eight or ten years. For most of the mercantile firms in Calcutta, the rate of neutralization of the price increase was based on an index prepared by the “Capital” magazine since World War II, and had by 1960s come to a position that the index had risen by 200-250% over the base figure of 1939. Thus, a clerk earning a basic salary of Rs. 40 per month would effectively be getting about Rs. 300 per month as gross salary inclusive of the VDA. The staff were content that the successive increases in market prices were getting neutralized wholly or in good part, and the employers seemed reasonably happy as elements such as provident fund and the annual bonus, on which legislations had been introduced in the 1950s were related to the basic salaries (to the exclusion of the VDA), and thus their liabilities on this account were reduced significantly than if it had been otherwise. This had continued with some modifications into the Sixties, despite the fact that the decade of the Fifties had seen relative price stability. But industries had been growing behind a steep tariff barrier since then—in some cases with customs duty as high as 350% —and no one had been particularly bothered. But the devaluation and the need to earn foreign exchange to meet essential needs of foodgrains,

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crude oil, oil seeds, etc. generated new pressures on prices as, willy-nilly, industries tried to sell more quantities abroad to earn at least the same amount of foreign exchange. This tended to siphon off sizeable quantities of produce from the domestic market, thereby exacerbating the domestic inflation, due to the inability of supplies to keep pace with both domestic and overseas demand. Prasad found to his wonderment that what followed was quite contrary to what conventional economics said about industries coming up to meet with increasing demand, and earning higher profits in a period of rising prices. The provisions of the Industries (Development & Regulation) Act, and the Capital Issues Control Order that regulated the issue of equity capital for financing fresh investment, saw to it that there was effectively a brake on the growth of industries, whether they be important strategic industries, or those manufacturing soap, toothpaste, and clothing materials.

The provisions of the Industries (Development & Regulation) Act, and the Capital Issues Control Order that regulated the issue of equity capital for financing fresh investment, saw to it that there was effectively a brake on the growth of industries, whether they be important strategic industries, or those manufacturing soap, toothpaste, and clothing materials. While both the Second Five Year Plan (starting in 1957) and the Third Five Year Plan (in 1962) laid emphasis on the handlooms and small scale industries to meet the demand for goods of day-to-day usage —or “wage goods” as Prasad had learnt from the textbooks—their growth obviously did not keep pace with the rising demand. Thus, from mustard oil—the darling of Bengali cooking—to “besan” for making fries, or “suji” or semolina for making some home-made sweets, to “dal” or lentils, or even “muri” or puffed rice—the common man’s snack—there seemed always an air of shortages and uncertainties. In the process, another new economic element—hardly ever discussed in the textbooks then—came to the fore: that of “trading profits”. Prasad had certainly not heard of it, and his parents and many of his colleagues

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also seemed uncertain as to what this creature “trading profits” really was; although the business circles seemed more than aware of it, and quite happy living with it. At the same time, when he sat down to think over the matter, it seemed so absurdly simple. A trader or dealer in the neighbourhood buys a commodity, say mustard oil, or sugar or besan in mid-March at a given price, and stocks the goods in the shop where a householder can go and buy it according to his or her requirements, and by end-March, due to a change in the supply and demand situation, such as prolonged lack of rains in a region which supplies dal, or mustard seeds for that matter, the prices rise. At that point of time householders wanting to buy them would have to pay an additional 10 or 15% on the stocks that had been in fact purchased earlier by the dealer at the previous, lower price. This extra 10 or 15% margin over a fortnight’s time would accrue to the dealer or trader as ‘trading profit’, without any effort on his part. Effectively, this also entailed the transfer of a sizeable part of the salary income of the householder to the cash income of a trader, which seemed by some sleight of hand to vanish into thin air. Overall, this phenomenon had resulted in consumers trying to hurry up their purchases to beat the possible price rise in the next week or fortnight, and the traders on the other hand trying to hold back their stocks for sale to take advantage of the expected price rise. This, in turn, brought about occasional raids on shops and markets by the Enforcement Branch of the state government to unearth hoarding of commodities, an action which at times brought about its own element of harassment and hardship, as some of the goods then just vanished from the market! If the transactions of the Income Tax Sub-Committee had opened Prasad’s eyes to the first concern of the Chamber, and the piles of representations on the Industries Act to the second, the meetings and correspondence on the looming abolition of the Managing Agency system were a close third. These concerns, over the next few months, made clear to Prasad progressively the differing aims and objectives of the half a dozen chambers of commerce that were then functioning in the city. Although it was not really spelt out, the Eastern Chamber, by its very origin in the second half of the nineteenth century, and the composition

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of its membership (drawn mainly from the managing agency firms) had a position quite different from that of the others. Quite a few of its members were ‘sterling’ companies, that is, having sole or majority shareholding in the UK—overseas banks, and leading professional firms—and they tended to have, if one could it put that way, an ‘internationalist’ bent of approach, in the sense that international practices and trends usually found place in their representations and memoranda. On the other hand, there were chambers comprising largely, if not entirely, of upcountry businessmen such as Marwaris or Gujaratis, and one representing the Bengali business houses, who had their hearts and minds set within the shores of India. Some had their origins in the early years of the twentieth century, and others, the more recent ones, were of entrepreneurial, industrial origin. In addition, there were those confined entirely to trades and traders’ interests. It was known, although hardly ever discussed or debated, that each of these chambers had their own “constituency” (so to speak) of trades and industries, and it would be quite on the cards that they would speak in different voices on particular issues. Thus trading profits that seemed to many as being morally repugnant—in the sense that if a trader had in fact purchased some goods at a price, he ought not to charge a higher price within a week or fortnight of it—was all too natural and normal to the chambers of traders for, after all, they were not in the business of charity. The issue of abolition of managing agencies was all too close and gave rise to a fierce debate on the pros and cons of the system. So far as the studies at college had showed up, the managing agencies were large— often disparate—conglomerates that oversaw the running of industries ranging from tea to jute to paper, coal, shipping, and literally, what have you. The votaries of the managing agencies, such as the Eastern Chamber, held that under conditions of scarcity of capital and managerial talent in the country, the system helped the industries to economise on, and to make the best possible use of these two resources. Usually, about five to ten percent of the profits of the subsidiary, or the ‘managed’ firms, were given out as managing agency ‘fees’. The opponents, including the political parties in opposition, saw them as embodiments of

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monopolies and imperialism (by the fact that they had majority overseas shareholding), therefore, exploiters of the poor and the middle class. The government, with the ‘socialistic pattern of society’ as its guiding principle, went along with that and set about to dismantle the managing agencies with a will. From whatever documents that passed his desk, it seemed to Prasad that with provisions of the Industries (Development & Regulation) Act, the looming abolition of the managing agencies, and the serious debate in political circles on control of monopolies, the prospect of private investment in the planned development of the economy being realized was becoming dim. Despite all this hectic activity of letters, representations, phone calls, meetings and so on, life by and large at the Chamber moved on in its languid pace. The senior expatriate staff still went out for drinks and lunch either at the Bengal Club or at the Calcutta Swimming Club on Wednesdays (for relatively a short time), and on Fridays (for at least a couple of hours). It was rumoured—only rumours, mind you—that some of them frequented the 300 Club and even, it was said, the Golden Slipper nightclub that stood diagonally across the Minerva cinema hall, behind the New Market. The Burn Club and the Caledonian Society— the secret throb in the hearts of the many Scotsmen then in the expatriate community—which Mr. Mactavish in the Chamber secretariat (under the watchful eye of the burra-sahib) largely coordinated, held regular meetings and ‘do’s’. The local staff, particularly clerical and subordinate, went their respective ways, wafting across the hall in ones and twos in an eternal search for tea or drinking water, or dropping in for chat in the typing or the accounts sections—to chivvy things along, it was said. Some amongst the Anglo-Indian staff pored over racing books in whatever time they could shake out and made discreet calls, and certainly by 1.30 p.m. on Saturdays were up and away at the Kidderpore Races, come hell or high water. The other Indian staff, between the rock of the expatriate staff and the hard place of the local clerical staff had to keep the work moving, but managed nonetheless to go out for a drink in the evening after office at the Spences’ Hotel that stood conveniently close on Wellesley Place opposite the Raj Bhavan. Somehow it had filtered

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through the very rhythm of work at the Chamber, and the demeanour of the expatriate staff, that there was a time to work and a time to relax. If one could finish off a day’s work by the official close of work at 4.30 p.m., then it was certainly not frowned upon if one went off for a game of tennis or squash, or to a cinema, or perhaps just a round of drinks with friends. It was therefore in the fitness of things that despite so many preoccupations on the economic and commercial scenes, there was a grand party on the occasion of the Chamber’s annual general meetings (sometime in June) that was held in the huge ballroom of one of the premier clubs in Calcutta, with glittering chandeliers and ladies in gowns and gentlemen in black ties; knights of the realm and baronets rubbing shoulders—well, almost—with hoi-poloi like Prasad. He had managed to cadge a dinner jacket (by no less than Austin Reed of London) and a black bow tie from one of his uncles who had studied in Edinborough, and managed to hold on to his one peg of Johnny Walker Black Label Scotch whiskey through the evening. It was not the done thing to be greedy; or at least to be seen to be one.

Chapter

4

Further Afield

Within about six or seven months of Prasad commencing work in the Eastern Chamber, and after leading him through four or five subcommittee meetings, Parrish lobbed him off to the Engineering Department with a brief “Ah, it is time that you had a look at some of the other departments”. The full time secretarial officer in charge of Engineering, Charles Carlton, was away to Delhi on some assignment, and Mr. A.K. Maclaren, who had earlier been looking after the Mining Department, had been assigned to this section, assisted by Ronald D’Costa (drawn out from Arbitration) and Prasad. In the three months that Mr. Maclaren had been there, just about two trunk-loads of unfiled papers had accumulated, and the staff was running around in circles trying to tie papers together and complete the files, so as to be able to deal with the various matters that were being thrown at the Engineering Department almost on an hourly basis. What with Mr. Maclaren’s interminable filling and tamping down of the tobacco in the bowl of his pipe and lighting and re-lighting it every now and then, and the periodic scraping and cleaning of it, besides his penchant for sharpening every one of his pencils every morning and

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afternoon, the papers did tend to get held up. Still, with guidance from D’Costa, and with the patience and diligence of Kartik Samanta, the head clerk in the section, and some knowledge of subject-wise filing and indexing that Prasad had picked up from Mondal-babu in the short time he had been in the central secretariat, it was possible within about six or seven weeks to get the papers filed and the system more or less on an even keel. If the central secretariat of the Chamber dealt with broad policy issues of managing agencies, monopolies, Companies Act, Income Tax Act and the like, the Engineering Department was altogether a different kettle of fish. Of course, the composition of the membership of the respective sections was quite different. The former included the major managing houses and some of their important subsidiaries or associates, subsidiaries of well-known overseas industrial undertakings, banks, insurance companies, solicitors’ firms, and major importers and exporters. The latter was dominated by far by individual engineering firms—many of them having majority Indian ownership—engaged in a wide array of businesses: railway wagons and components, cranes, structural engineering, refrigeration and air-conditioning, machine tools, electrical lighting and fittings, electrical engineering, steel tubes, and the like. Their concerns were the bread-and-butter issues of the orders position, raw materials supply, availability of power and fuel, labour problems, factories and safety regulations, government contracts and contract terms (for many government bodies such as the Railway Board, the Directorate General of Supply and Disposals, Central Public Works Department, the Irrigation Department, and the ordnance factories had major purchase plans each year), financing and payment problems, issues of design and standardization, and what have you. The Managing Committee that oversaw the affairs of the engineering section was also different from that of the Chamber, which comprised mostly chairmen and managing directors of the respective companies, in grey pin-stripe suits usually with a carnation or a sprig of heather in the buttonhole. In the engineering section the members were drawn more from the line management like works managers, purchase managers, and sales managers who reported

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directly at that time to the respective company boards—with some general managers and directors-in-charge thrown in for good measure. Their dress was also different, with many in shirt-sleeves or even bush shirts. Several of them smoked foul-smelling cheroots, not pipes or any expensive cigarettes. As Prasad had progressively come to realize over the two years that he had worked in the Chamber, the debates on planning models, the drawing up of the Five Year Plans, and the macro-investment programmes seemed to be confined to the portals of Yojana Bhavan (from which the Planning Commission functioned) and the government secretariat in New Delhi. The man on the street had indirectly to face the rigours of the licensing controls on industry and the permit system for obtaining supplies of most items in general demand. The controls ensured that a householder wanting to construct a house had to run about a good deal to get a permit for cement from the Office of the Cement Controller, and a permit for reinforcing steel bars and rods from the Iron and Steel Controller’s office. For the day-to-day needs of rice, wheat or sugar, and even kerosene oil for cooking, one had to take recourse to the long queues each week at the local ration shop. At times, this also failed, and one had to return home with a part supply and a “Due Slip” in promise of making up the shortfall sometime in the future. Of course, Prasad had learnt in the Economics classes that in times of shortage of some essential commodities, it was necessary to introduce some form of rationing so that everyone got at least a part of his requirement. Usually these measures were required for an emergency, such as a war, for a relatively short period. But in India these measures were continuing for nearly two decades, unless one took the ‘war on poverty’ in the country too literally. It seemed even more socially demeaning and pathetic to Prasad that because of the rationing controls on the issue of rice, flour, sugar, etc., the father of a bride had to run from pillar to post to get the permit for some extra quantity of these items, and often had to arrange the usual Bengali marriage feast in a surreptitious manner, constantly in dread of the food inspectors. Moreover, no farmer with any excess rice for sale was permitted to enter any of the major towns to sell his produce—because

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the state government had embarked on a scheme of monopoly procurement of rice from the districts to keep prices in check and feed the burgeoning demand in the cities. This led, as Prasad often witnessed, to harassment and even beating by the police at railway stations of village women who were trying to smuggle in two or three kilos of rice under their saris to sell in the city markets, perhaps to buy in return kerosene oil, salt or medicines for their families. Drawing on whatever he had read or discussed in his college days, Prasad could see that some of the things that the successive Five Year Plans had targeted were absolutely necessary. Basically, these were an increase in income levels, higher availability of foodgrains, a degree of insulation from the vagaries of the monsoons, better education facilities and health-care—fundamentally, a basic change in the structure and content of an economy tied down with a history of a vicious cycle of low income and a low level of savings. The plans certainly provided a perspective to what needed to be done and the time-frame in which to do it. The Planning Commission, with its complement of senior economists and economic administrators, could look farther—and more clearly, with the growing wealth of data at its disposal—as to the best possible means to generate a surplus of income within a reasonable timeframe and at the lowest possible social cost. It could thus trigger off a “virtuous cycle” of income growth and increased savings and investments, that in turn would lead on to further growth. But, if Paku and Somu, the Santhal day-workers he had met at his uncle’s place in Santiniketan— Paku was immensely house-proud and could sweep and mop a house till it actually squeaked with cleanliness, and could weave the best reed mats, while Somu could dance beautifully and play on his flute amidst the rolling fields of Birbhum—were to be moved from their hand-tomouth existence as labourers on daily wages, and inducted into more productive occupation—productive strictly in an economic sense, much, much more had to be done than putting down an industrial unit in Panagarh or Durgapur. They had to be provided with the wherewithal of food and lodging, technical training to handle a sewing machine or a crane—all of which could take more time and cost more money than

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just the amount of investment in the industrial plant that would ultimately engage them. Somewhere along the line, things seemed to be getting bogged down either due to unclear premises, or ineffective or ill-planned execution, besides the entirely external effects of a war or a drought. For one, the Second Five Year Plan had been based on the assumption of a population growth of 1.5% per annum, whereas the actual rate of growth had been in excess of 2%. The estimate of foreign exchange requirements, and the balance of payments position also appeared to have been too optimistic in the plans. Somewhere along the line, things seemed to be getting bogged down either due to unclear premises, or ineffective or ill-planned execution, besides the entirely external effects of a war or a drought.

Thus, it transpired that in spite of reports in the press and elsewhere that the devaluation of the Rupee would lead to resumption, and indeed augmentation, of aid by the overseas agencies and countries such as the US, which had largely suspended their assistance following the IndoPak war of September 1965, there was little, if any, progress even after the passage of a year. Whether because of the economic turmoil that the country faced following the devaluation in June 1966, the severe drought that gripped many parts of the country in 1965-66, or because of internal tussles within the ruling Congress Party, or a combination of these and other factors, the general elections in 1967 saw a significantly reduced majority for the government at the centre, and the emergence of several non-Congress and coalition governments in the states, including West Bengal. In point of fact, the government under Mrs. Indira Gandhi had to rely to an extent on the support of the DMK Party of Tamil Nadu and the Communist Party of India to remain in office. The gains by the leftist parties in the elections in West Bengal, on the basis of popular resentment against the price increases, unemployment, and in the overall atmosphere of hardship and hassles, provided an impetus to the workers’

Further Afield

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unions to make major demands for better wages and terms. The state government, possibly due to political or ideological reasons, provided a “tilt” in favour of the workmen in their wage demands instead of trying to strike a balance between the workers’ aspirations and the immediate financial capacity of the respective industries. This coincided, as Prasad could observe through the melee of meetings, consultations, preparation of representations and memoranda, and so on, with a severe cut-back in orders from the Railway Board for wagons, and the drying up of public investment. Such cut-backs in turn led to considerable under-utilisation of capacity across a wide range of industries—from earth-moving and construction equipment, machine tools, and others—and to consequent financial difficulties as firms tried to cope with overhead and other fixed costs. This quickly gave rise to a new phenomenon that had not been seen earlier in the periodic tussles between workers unions and the management: the gherao, or physical confinement of senior management staff by the workers in pursuit of their demands for higher wages. According to most reports, this method of physical coercion to realize higher wages and terms outside the prescribed legal procedure laid down in the Industrial Disputes Act to resolve wage disputes had the direct or indirect blessings of the then Labour Minister of the state, Mr. Subodh Banerjee. Reports were coming in at least once a week to the engineering department about such gherao in one industrial unit or the other resulting in some cases of serious illness—and even death—of some of the senior executives who had been deprived of water or food for hours at a stretch, and in some cases not being allowed to relieve themselves. The labour officers and advisers in the engineering section were running from pillar to post to provide some succour to the besieged industries and executives. It seemed to Prasad at times that the moment of ‘proletariat revolution’ enshrined in the commonly voiced slogan of Inquilab Zindabad (‘Long live the Revolution’) that often rang out from the winding processions of factory workers in earlier days, and so much talked about and debated in leftist circles since Independence, was about to burst upon the West Bengal scene.

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These agitations, coming on top of the severe under-utilisation of capacity, and consequent financial difficulties severely hit many of the well-known and long-established engineering firms like Burn and Company, Jessop and Company, Braithwaites, Richardson and Cruddas (in western India), and others like Westinghouse Saxby, which had provided the backbone of heavy structural engineering in the country for decades. Of course, somewhat obscured from the academic and political circles and not much debated at that time in the Coffee House circles, the relative advantages that these industries in West Bengal and in the neighbouring states of Bihar and Orissa had enjoyed due to their proximity to the vital resources of steel and coal had been nullified since about the middle of the 1950s by the policy of the central government favouring dispersal of industries to other regions. For that purpose, as mentioned earlier, government had introduced a scheme for ‘freight equalisation’ for steel and coal, under which these items would be delivered at the same landed cost to any industry anywhere within India, thereby enabling any industry requiring these basic inputs to start off from the same base-line. It seemed however odd to Prasad that government had not thought it fit for the same purpose of regional dispersal of industries to introduce freight equalisation also for cotton and molasses (the basic raw material for industrial alcohol). As a consequence, the cotton textile and the industrial chemicals and pharmaceuticals industry flourished in western India relative to that in other parts of the country. On the other hand, Prasad could almost see before his eyes the progressive decline in the fortunes of the textile and pharmaceutical industries in West Bengal, which had, during the first half of the twentieth century, been pioneers in their respective spheres. Almost inexorably these industries were being pushed to the margin of losing their vitality and viability. Inexplicably, the political parties in the state, including the ruling leftist alliance, which had their independent line of thought, did not seem at the time to focus on these adverse effects of the central policy of freight equalisation and get them rectified. Issues of ‘monopoly capital’, and of ‘US imperialism’ occupied the political centre stage.

Further Afield

47

By about the middle of 1967, another political development took place that also had a significant bearing on industries and investment in West Bengal, and in some of the neighbouring states like Bihar. This was the sudden breakaway of a faction of the ruling Communist Party of India (Marxist) into a more strident revolutionary movement to free land from the major landholders in rural Bengal for distribution to the landless. Prasad had known about the abolition of zamindari estates by law, and the various land reforms regulations in the state since the early 1950s, which had provided just for this sort of distribution of excess land to the landless, and for regulation of the bhag-chashis or sharecroppers who tilled the land for large land-holders in return for a share of the produce. While allowing that these laws had not been fully or adequately enforced, the virulence with which the movement started in the Naxalbari area of north Bengal took Prasad and most others by surprise. Quickly, the movement—now commonly known as the ‘Naxalite’ movement from the area of its origin—spread to parts of south Bengal, the Singbhum area of south Bihar (now in Jharkhand), and also took strong roots in the Shrikakulam region of Andhra Pradesh. In many places landlords were killed and their lands distributed by force, and over the next couple of years or so, even common people such as traders, minor government functionaries such as police constables, junior land records officers, and even educationists began to be targeted, and many were in fact killed as ‘class enemies’. Even ordinary people going to the bazaar for shopping, or coming back home in the evening after a day’s work often glanced back over their shoulder, so common had fear and anxiety become a part of life. While the state government struggled to contain this movement, the climate for industries to stabilize, and for fresh investment to be made, became increasingly vitiated. By this time, around 1969, some sort of an internal ‘ideological’ struggle was also firmly under way in the Congress party and, consequently, within the government itself. The central government was riven by a tussle for power between the conservative elements in the Congress Party, commonly called the ‘syndicate’, who apparently wished to dominate policy-making and hold the levers of power over Mrs. Indira

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Gandhi, the Prime Minister, who obviously had other goals in her mind of ‘progressive’ policies she wished to pursue. According to some commentators in the press, in developing these ‘progressive’ measures with an eye to the general elections coming up in 1972 (possibly as opposed to the ‘regressive’ measures that her then Finance Minister, Mr. Morarji Desai, and the ‘syndicate’ had in mind), some economists such as Prof. P.N. Dhar (for some time) and her secretary (and later her principal adviser), Mr. P.N. Haksar had a significant role. She was also considerably assisted by her so-called ‘kitchen’ cabinet (which, according to some political commentators included Mr. Dinesh Singh and Mr. I.K. Gujral, amongst others), and the ‘Young Turks’ (a label put by some on Mr. Chandrasekhar and Mr. Mohan Dharia of the party). Mrs. Gandhi also made repeated appeals for re-orientation in the administration to develop what she called a ‘committed bureaucracy’ as apparently it was felt that the normal administrative set-up to assist government in carrying out its mandate according to constitutional and statutory norms was proving inadequate for the ‘progressive’ measures she had in mind. It seemed particularly disconcerting to many people in her party and outside that, according to reports then appearing in the press, some of the Prime Minister’s closest political colleagues and advisers around that time, and over the next three or four years, such as Mrs. Nandini Sathpathy, Mr. Mohan Kumaramangalam, Mr. K. Raghunatha Reddy, Mr. I.K. Gujral, Mr. D.P Dhar and, of course, her principal adviser, Mr. P.N. Haksar, had either been full members of the Communist Party at one time or the other, or had been active sympathizers or ‘fellow travellers’. Some commentators believed that this in turn led to a particular ‘exclusive’ ideological slant (in the sense of “those who are not for us, are against us”) in the Congress party that had been markedly free of such a mind-set so far. And importantly, they believed that it led to adoption of political tactics that smacked of ‘agit-prop’ (a finelytuned mix of agitation and propaganda) that communists used at one time or the other to further their political objectives. Last, but not the least, this phase led to the rise of the committed bureaucracy that the then government laid particular stress on, and which possibly contributed to subsequent lowering of administrative standards.

Further Afield

49

Last, but not the least, this phase led to the rise of the committed bureaucracy that the then government laid particular stress on, and which possibly contributed to subsequent lowering of administrative standards.

In the process of election of the next President of the country in the middle of 1969, Mrs. Gandhi did not favour the ‘official’ candidature of Neelam Sanjiva Reddy, and pushed for the election of V.V. Giri, a renowned labour leader of south India. Matters came to a head, and the Congress Party formally split between the ‘Organisation’ and the ‘Indira’ groups. Prasad could hardly comprehend the pulls and pressures of politics that had led to this. But he had some vague sense that the party which Mahatma Gandhi had guided for over thirty years before he was killed, and which had brought together great stalwarts of the freedom movement such as Jawaharlal Nehru, Sardar Patel, Maulana Abul Kalam Azad, and others, had now changed beyond the common perception of a party of consensus, of ‘inclusiveness’; truly, a movement. It was now a full-fledged ‘political’ platform relying on a ‘committed’ bureaucracy, and perhaps even, as later events suggested, a ‘guided’ judiciary. Some straws in the wind by the end of 1969 showed up the directions in which Mrs. Gandhi wanted to move. In 1965, under Shastri, a small concession had been granted in the industrial licensing provisions by which units wanting to expand their capacity and production to no more than 25% of the sanctioned level, could do so through a relatively simple procedure. Now, more industrial sectors were reserved exclusively for the small-scale sector (going up at one point of time to more than 800 such specified industries), which was defined as having a fixed investment of a certain level, say of Rs. 20 lakh. There were also stipulations that certain items would be purchased by government for its defence or civil purposes exclusively from the small-scale units. So, established units in a particular ‘reserved’ industry would just have to mark time till circumstances brought them to their knees. Any consideration about economies of scale in production—a very basic concept in the theory of the firm in the field of micro-economics, as

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Prasad recollected, was severely set aside. Moreover, as Prasad was to observe increasingly over the next few years, the stipulation of the minimum capital investment, and in the sales turnover (which exempted the small-scale units from the central excise net) usually led, after a point, to the ‘splitting’ up of a growing unit and hiving off of its expanded capital and sales into another ‘small-scale’ unit. There were persistent reports that some sections of the small-scale industries functioned more as ‘paper’ or ‘front’ units of larger units or of other small-scale units— surreptitiously or otherwise—for getting allocation from government agencies of scarce inputs like steel or coal and the like. The R.K. Hazari Committee, set up in 1966 to examine the way in which the industrial licensing provisions had operated, came out with the report that some industrial houses had ‘pre-empted’ or, put more crudely, had ‘cornered’ the industrial licences at the cost of other prospective applicants. This caused considerable concern in official circles; although it seemed to Prasad that any licensing regulation was apt to develop into some sort of a ‘queuing’ system where the sequence in time of an application for industrial licence, would be an important element, and therefore one could perhaps say that an element of ‘pre-emption’ was built into the process. Anyone who could understand the system and ‘play’ the rules to expand and grow would certainly come up trumps. In any case, the administration of the industrial licensing regulations lay entirely in the hands of the government, and it was best placed to clarify, and if required, to rectify the process, instead of throwing up its hands in horror at what its own policies and their implementation by the concerned bureaucrats had brought about. At the same time, the Hazari Committee recommended a raising of the bar for industrial licenses to allow easier entry for players. Shortly afterwards, government constituted the R.C. Dutt Committee to look into the lacunae if any in the industrial licensing provisions and set-up, so as to curb any emerging monopolistic tendencies. What was more, a law specifically to control and regulate monopolies was on the anvil, and this seemed to be inclined more to define a monopoly according to some pre-defined turnover rate, say Rs 20 crore, rather than (as the theory books had it), putting a

Further Afield

51

particular industrial unit under scrutiny because it accounted for a major share of the market for a product, and thus was able to manipulate the market to its advantage, and to the disadvantage of the consumers. Over all this came, in rapid succession, the nationalisation of the coking coal mines, and then the nationalisation of fourteen major banks in July 1969. There were then nearly 90 big and small banks operating in the country. The ‘social control’ of banks had been bandied about for some time past in the political circles, apparently because there was a perceived need to provide more funds for development of agriculture, and the small and medium scale industries, relative to the funds then being given to the large-scale industries and trades. The nationalisation of foreign banks had also been spoken of from time to time, but no action had been taken on this front. According to some commentators, however, there was also an unstated objective of curbing the power of the banks which had close business or family connections with some big industrial houses in the country. While the benefit of doubt could be given to the measure, it seemed to Prasad that the nationalisation was contrary to the policy of a ‘mixed economy’ that Nehru had espoused, and that a degree of ‘social control’ with prior, set objectives was any day better than government having itself to take over the business of financial intermediation. Earlier, in 1968, the government had introduced the Gold Control Act by which stocks of gold (whether held by a jeweller’s shop or by a householder) that was over a stipulated limit had to be declared and, in specified circumstances, deposited with government against the issue of a bond. On the face of it, government wanted to build up its stock of gold and wean the people from their preoccupation with gold as the major form of savings. At that time, most, if not all countries were still on the ‘gold standard’ by which their balance of trade and payments in and out of the country was accounted for. Of course, many people did not see it that way and felt that government was unnecessarily interfering with personal matters and, in a way, with their life. It seemed that the debate on economic issues that had characterized the 1950s had now been overtaken by serious preoccupation with more markedly political matters

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and stances. There persisted a feeling that, possibly, government was taking the means as being the end itself in removing poverty and illiteracy in the country. It seemed that the debate on economic issues that had characterized the 1950s had now been overtaken by serious preoccupation with more markedly political matters and stances. There persisted a feeling that, possibly, government was taking the means as being the end itself in removing poverty and illiteracy in the country.

It hardly helped that since around the middle of 1969, the government had done away with Section 293 of the Companies Act which previously had allowed companies to make donations to political parties in a legal fashion. It was increasingly being bandied about that this measure effectively helped the government of the day to collect political donations surreptitiously, in an unaccounted fashion. The Chamber had protested against this, as at least some of the more professionally run companies felt that making political donations in a legal and accountable fashion was any day to be preferred over covert and unaccounted contributions, which tainted those who gave as much as it did those who received. At the same time, the country seemed to moving some way from the persistent food shortages with the steps taken over the preceding three or four years under the guidance of Shastri, and Mr. C. Subramaniam, then Food and Agriculture Minister, in bringing about a ‘green revolution’ with the introduction of high-yielding varieties of wheat and rice—the Lerma Rojo, the Taichung and IR8—from the international agricultural research institutions. No doubt these new varieties required more of fertilizers and irrigation, but their yields in those days were so much more that the additional cost and effort was well-compensated. What was even more important was that they had a shorter growing and ripening period and, therefore, more than one crop could be grown in the course of a year. These strains also had a short, bushy structure, which helped to reduce the rate of evaporation of irrigation water from the field.

Further Afield

53

From a one-crop agricultural system, the country was moving gradually to a two-crop situation, with obvious benefits for raising rural income and employment. To be sure, this ‘green revolution’ was confined largely to the irrigated areas of Punjab and the adjoining areas of Uttar Pradesh in western India; but the country as a whole seemed more reassured that, at long last, the spectre of famine and perennial food shortages would be over. Still, it was not clear if the talk of nationalisation of the wholesale grain trade that was doing the rounds in the political circles would really help or hinder the process of agricultural development; it certainly helped to keep the trade on tenterhooks which was possibly the whole intention. Along with the green revolution, India witnessed the onset of the ‘white revolution’ and empowerment of village women in Gujarat. The movement was started at the Kaira Milk Cooperative in Anand and was spearheaded by the redoubtable Dr. Verghese Kurien who brought milk within easy reach of practically every household in India. Thus, the wellknown ‘Amul’ brand came into existence. Prasad’s tenure—hard work in exciting times—in the Engineering Department was drawing to a close. In between came the interesting merger in the UK of two behemoths in the field of electrical engineering in those days—of the Associated Electrical Industries into the General Electric Company under the guiding hand of Mr. Alan Weinstock. This led also to the merger of the two Indian subsidiary companies, which then proceeded to appoint one of the youngest managing directors, of about 36 or 37 years of age. It was one of the first major exposures of Indian industries—other than the re-structuring of Lever Brothers into Hindusthan Lever some years earlier—to global management changes, and to the phenomenon of mergers and acquisitions. It certainly grabbed the attention of Indian industries and the press. In keeping with the government’s latest political thinking, the Monopolies and Restrictive Trade Practices Act came into being in 1970, and the abolition of the managing agency system was formalized in the same year. The British managing agents had started moving out over the previous two or three years, and several of their Indian business

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counterparts, be they suppliers or contractors, or banias or financiers, had been co-opted into the management boards. The beer parties, the gin and tonic and, the general atmosphere of koi hai, the steeple chases, equestrian shows, the paper chases and all that at country clubs such as the Tollygunge Club, the duck and snipe shoots near Bashirhat or at Kadapara were drawing to a close. Rex, the black Labrador, and Ginger, the brown Cocker Spaniel, no longer accompanied the burra sahib in the backseat of the car—the Vauxhall on week-days and the Rover on Saturdays—to the office. In many cases the dogs were given away, amidst tears and sniffles, to Indian friends or neighbours; or worse, to the faithful maali or the jamadar, the sweeper. Those were certainly not happy times for many.

Chapter

5

The Turbulent Years—I

An overall sense of confusion and harassment pervaded as people from the general walk of life faced the escalating prices (which rose over 20% during 1966, and nearly 30% during 1967). The unemployment situation was bad. The registration in local employment exchanges had grown from 1.83 million to more than 5 million, i.e., by about 8% per annum between 1961 and 1971, a decade which also saw annual growth of 2.48% in population, and a prevailing atmosphere of political uncertainties. Between 1967 and 1970 over 1800 state legislators out of a total of around 3500 opted out of one party and joined up with another, and over 20 state governments fell and rose according to one commentator, giving rise to derisive terms like Aya Ram and Gaya Ram or ‘To-ers and Fro-ers’ to describe the political turncoats and opportunists. There had also been a ‘distress’ sale of one of the neighbouring buildings belonging to the Chamber in 1970 to raise resources for meeting the higher provident fund and pension liabilities of the expatriate staff (following the devaluation of the Rupee). Most of the Chamber staff felt rather put off by this—it was like selling off the family silver and, as one thoughtful senior colleague remarked privately to Prasad, it

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did not really appear to make sense to sell off a capital asset to meet certain immediate revenue liabilities. But the higher management had thought otherwise. In spite of all this, Prasad had some small cause for personal satisfaction. He had been able to provide some additional resources and comfort for his parents, buy some new clothes, including a nice suit, and acquire a bonny—but second-hand—Standard 10 car that one of his seniors had once used, for the royal sum of Rs. 6000, and get inducted into—a matter of good form, it was said, with one of the Chamber officers proposing—as a member of a well-known sports club in Calcutta. In addition there were the occasional binges—just occasional, mind you; one can only do so much with a monthly salary of Rs. 950—with friends on New Year’s eve or some other occasion at the Princes’ restaurant at the Oberoi Grand, or at the Maxim’s at the Great Eastern Hotel. The Golden Slipper was out-of-bounds; for one never knew whether one would bang into one or the other of the senior expatriate executives of the Chamber, and the 300 Club was way above their heads. The annual general meetings of the Engineering Department also provided considerable diversion with spectacular buffet lunches—complete with ice sculptures—preceded by rounds of beer and gin to drown the sorrow (so to speak), at the one and only Firpo’s on Chowringhee Road. But peace—both literally and metaphorically—was not to be for long. By about February 1971, serious political disturbances erupted in East Pakistan concerning the official language, certain economic issues and, basically, about sharing of political power with West Pakistan. There was a severe army crackdown in East Pakistan and, before long, streams of refugees started flowing into West Bengal and Assam to escape the rape and pillage that had broken out in that country. Soon the figure of refugees topped about 8 or 9 million and, despite the strenuous efforts made by Mrs. Gandhi and her government to make the rest of the world to sit up and take notice, nothing really came of it. The burden of refugees was once again taxing the country in terms of food, medicine and shelter, and it seemed to Prasad that the country was destined to go through another long bout of dislocation and deprivation. Taking care

The Turbulent Years—I 57

of the refugees was not only taxing the national exchequer, but was also posing serious social problems, especially in the eastern region. Somehow, the country groped through that summer and the monsoon rains, with a huge amount of patience and good, solid work at the grass-roots level to contain the refugee problem and the economic fall-out. Local resistance groups had formed inside East Pakistan and were harrying the regular Pakistan Army. Finally, late on the evening of 3rd December 1971, Mrs. Indira Gandhi made a small announcement over the radio (there being no TV then) that the Pakistan Air Force had attacked some parts of western and northwestern India, and that the Indian armed forces had been asked to give a fitting response. The heart of every Indian—and particularly of those like Prasad who had a modicum of para-military training in the National Cadet Corps—went out to the gallant Indian armed forces who, under General S.H.F.J. Manekshaw, Lieut. Gens. J.S. Arora, T.N. Raina and others, ably assisted by the Air Force under Air Marshal Arjan Singh and the Indian Navy under Vice Admiral S.M. Krishnan, went to battle into East Pakistan, in the Bay of Bengal as well as on the western frontier with Pakistan. The heart of every Indian—and particularly of those like Prasad who had a modicum of para-military training in the National Cadet Corps —went out to the gallant Indian armed forces who, under General S.H.F.J. Manekshaw, Lieut. Gens. J.S. Arora, T.N. Raina and others, ably assisted by the Air Force under Air Marshal Arjan Singh and the Indian Navy under Vice Admiral S.M. Krishnan, went to battle into East Pakistan, in the Bay of Bengal as well as on the western frontier with Pakistan.

It was an unequal battle on the ground as well as in the air. Melville D’Mellow and Surajit Sen with their wonderful reviews and presentations over the All India Radio on the progress of the war, and pungent political commentary by representatives of the Bangladesh government-in-exile kept up the public morale and dedication. The result was that within ten days, Gen. Tikka Khan, the Martial Law Administrator of East Pakistan left for safer climes, and within the next few days Lieut. Gen.

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A.A.K. Niazi surrendered with more than 90,000 Pakistani soldiers to Gen. Arora. A new nation, Bangladesh, with a new flag, and a new national anthem was born as a fledgling democracy. The sense of elation in India, and a new-found confidence, rose to a peak not achieved since the moment of Independence some twenty-four years ago. The events in Bangladesh and the animosities it aroused in the Nixon administration in the USA, which at one time threatened to send the formidable Seventh Fleet to teach India a lesson, pushed Mrs. Gandhi to a treaty with the Soviet Russia covering security and economic assistance. While Russia had more than a passing interest in the affairs in India, particularly since 1967 when Mrs. Gandhi formed a government with the “outside” support of the Communist Party of India, the bonds became much closer now, and defence materials and large scale machinery imports from Soviet Russia commenced under a new Rupee-Rouble exchange agreement. This allowed India to pay in Rupees instead of in hard currency for the materials imported from Russia, and thus, to a considerable extent mitigated the persistent foreign exchange crisis. But the rate of exchange with the Rouble was by treaty and not determined by the supply and demand for the currency. It bore little or no resemblance to the actual rate of exchange of the Rouble itself with the US Dollar or the Pound Sterling. The Rupee, which in those days traded at about Rs. 8 or 9 to the US Dollar, was pegged at about Rs. 6 to the Rouble, when the latter itself in international markets was being traded at about 3 or 4 Roubles to the Dollar. The idea was that the entire import and export trade with Russia would be designated in Rupees and, at the end of each period of review, the debit and credit in the commodity trade would be squared up, and a net Rouble debit or credit to the account of India would be left to be settled by way of credit or loan from the Soviet Russia, or supply by India of certain commodities - be it textiles, leather goods, tea, or medicines, etc. On the face of it this significantly helped India to bypass the intransigence of USA at that time, and the scarcity of hard currency. But a number of problems accumulated over the years as Russia in many cases was reported to have considerably overpriced its machinery and materials—including

The Turbulent Years—I 59

defence supplies—and had also in many cases diverted the exports of India in Rupee terms on the high seas in the process of shipment to Europe or the US, thereby earning good, hard currency itself at a throwaway price. In effect, this process inflated the cost of investment in industries directly because of the higher in-built costs, and indirectly because Soviet technology in a number of cases did not match that of the USA or Europe. But, as Prasad realized early on, beggars cannot be choosers. Early in 1972, shortly after Bangladesh had emerged, Mrs. Gandhi formed a new government with a massive mandate on the slogan of “Garibi Hatao” or “abolish poverty”. This had been the hope of practically every political movement ever since Mahatma Gandhi spoke of wiping the tear from every eye, and Jawaharlal Nehru on the eve of Indian Independence declared that the country must address the burning issues of poverty and equality of opportunity for every citizen. A new hope was kindled that the thrust towards economic development and social progress, which had faltered on account of a number of factors, would be resumed with new vigour. The Prime Minister led off with nationalisation of general insurance, and then, in 1973 with nationalisation of the coal industry as a whole. The government had in 1969 nationalised the major banks, and now, with nationalisation of general insurance (life insurance having already been nationalised in 1955 in the Nehru era) resulted in control of practically all of investible resources by way of private household savings in the hands of government. Except for the owners, and the management of the banks who bemoaned the nationalisation as uncalled for, the general perception was that if government could, with these huge resources at its command, make some perceptible impact on reduction of poverty levels and raise the pitch for economic growth, nationalisation would have served the purpose. At the same time, the government pushed through the Foreign Exchange Regulation Act in 1973, which stipulated that all foreign holdings of shares in any company or firm in India must be reduced to less than 50%. Exception was made in cases where the company took prior permission of government, and satisfied certain very specific conditions

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such as induction of new technologies, export orientation and foreign exchange earnings, employment generation, and so on. This legislation had been in the air for some time, for the government seemed to be wary of the “multi-national corporations” and vestiges of “imperialism”, and had aired its views more than once. To the average Indian all this had a reasonable nationalistic colour, but it hardly mattered if he or she got his toothpaste, washing powder, or cup of tea, or electric supply from an Indian company or one with a majority overseas shareholding. His prime concern was the price at which the commodity or the service was available, its easy availability in the market without having to queue up for it, and of course that it was of a reasonable quality. Still, the legislation when it came dealt a blow to overseas shareholders and, willy-nilly, whether they really wanted to pull out their investment or not, they had to sell out to prospective Indian shareholders. In the process, some Indian businessmen had some plum companies practically fall into their lap, and they were certainly not complaining. But capital was not all that plentiful within India in any case, and these developments led to considerable faltering of the economic growth process. The man in the street had little knowledge of these happenings, and had even less interest in it. He was primarily concerned with keeping body and soul together on his meagre income amidst a flurry of rising prices, and how to educate his children with the little resources available to him, and somehow get one of his sons into a job before he himself reached the point of retirement, or became too old or too ill to work. There did not appear to be much of a silver lining to the clouds that gathered around him. Following its nationalisation, a good deal of confusion and uncertainty prevailed for quite some time in the coal sector, as colliery owners ran from pillar to post to get some compensation for the investment they had already made on the ground to open mines and run the collieries. Administrators had to be appointed and stocks of coal, the state of the machineries, and the position of the workers had all to be verified. This directly affected West Bengal and Bihar the most as the major collieries were all in the Ranigunge-Dhanbad-Jharia belt along the banks of the Barakar river. But there were disruptions in the coal supply for some

The Turbulent Years—I 61

time following the nationalisation which also told on industries elsewhere in India. Within the Chamber, there was quite an uproar as the general insurance sector had a number of overseas players such as Norwich Union, Royal Insurance, North British and others who felt that they had been shortchanged by the government action, just as much as the private Indian insurance companies such as Ruby General, Hindusthan General and others had been. Government, which had earlier steered clear of nationalising the private overseas banks, now seemed to have grasped the nettle firmly, and there was little the companies could do except indulge in some futile agitation and representations. Similarly, the Coal Department of the Chamber, which had dealt with the coal mining interests of the member-companies such as Bengal Coal, Equitable Coal, Jharia and North Barakar Coal and others, seemed overnight to have become orphaned. Staff who had served for decades, and had information and statistics on coal quality, raisings and supplies at their finger-tips, found themselves for all practical purposes without a job. The Joint Working Committee of the British-held and the Indian-owned coal companies, which had overseen the production, supplies and exports for years, went into limbo. It seemed poignant at times to Prasad that large “zamindari” houses, which at the time of Independence had huge land holdings, and which had branched out into mining as an extension of their traditional occupation, had lost thrice over. First, at the time of Independence, when their holdings in erstwhile East Bengal had slipped into the orbit of the state of East Pakistan, then in the appropriation and vesting of their excess land in West Bengal under the estates abolition legislation and land reforms regulations, and now again they had lost assets they had built up over four or five decades when there was little public or state investment in these sectors. They had provided the public at least with a ready supply of fuel at a reasonable price, even if they at times lacked the cereals to cook. As ill-luck would have it, by about the middle of 1973, the simmering tensions in the Middle East over a number of political and economic issues led to the major oil exporting countries such as Saudi Arabia,

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Iran, Iraq, Kuwait, Bahrain and others, like Indonesia, under the banner of OPEC, or the Organisation of Oil Exporting Countries, successively to increase the price of crude oil they were supplying to the world by about three times—from about US Dollars 3.1 per barrel to about US Dollars 11.8. India, although it had a relatively low level of demand for oil at the time, and was importing a relatively small proportion of its crude oil requirements, nonetheless faced a major setback. Energy costs usually range from 15 to 20% for most manufacturing industries, but in the transport sector—both by road and by rail (as diesel locomotives were being increasingly used for goods haulage)—the impact was severe. The direct outflow of foreign exchange—in any case in almost perpetual short supply—for import of crude oil went up significantly, and the government was compelled in quick succession to increase the price of petrol, diesel and kerosene by about three times. This led inevitably to country-wide agitations because of the burden of increasing fuel and transport charges. Prices in the country (which had risen by an average 8.2% per annum between 1961 and 1971) escalated by 23% during 1973, and by a further 30% during 1974. At the same time, the standing practice of providing adjustment for the price inflation by way of “dearness allowance” (or DA) for a large section of the employees in the public sector, i.e., in government departments as well as in governmentrun companies, and in the organised private sector units, led to a huge burden of DA for both government and the industries. Government responded by introducing the Compulsory Deposit Scheme, under which a portion of the DA entitlement was held back in the form of deposit certificates issued by government (to be redeemed suitably at a later date), thus effectively impounding a good portion of the adjustment in the DA, and to an extent helping to moderate the price spiral over the next few years. As Prasad was beginning to realise, politics was never far from the emerging economic scenario. By early 1974, a new political movement for cleansing the body politic of corruption was started by the Nava Nirman Samiti in Gujarat, and this was swiftly taken up under the leadership of Jayaprakash Narayan, a noted Gandhian leader, in Bihar

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and elsewhere. General strikes and widespread agitation became the order of the day. Industrial workers in the railways and elsewhere also joined the fray and the government was hardput to contain the disturbances and start a political dialogue. Persistent contemporary reports about the not-so-desireable activities of doling out import and export licences and deriving unaccounted benefits in the process concerning certain ministers in Mrs. Gandhi’s government, left much to be desired. For that matter, most people who retained some concern about the probity of public life had felt increasingly disturbed for some time about certain persons purportedly close to Mrs. Gandhi, who, while holding some nominal party posts, appeared to be overtly concerned with matters economic, and seemed to intervene directly in dealings with representatives of commerce and industry. This sense of concern further deepened with the obviously heightened role that Mrs. Gandhi allowed her younger son, Sanjay, to play in both party affairs and the political and economic administration of the country. He in turn had gathered around him some people who reportedly interfered directly or indirectly in matters of day-to-day administration, and seemed to reduce the making and unmaking of state Congress leaders almost to a child’s play. While these developments appeared to take place only in the political plane, they inevitably had their repercussions in the economic sphere as well. Deficit financing of the planned investments, indeed of a good part of the government’s budgetary exercise, meant that over and above the international developments such as the increase in price of crude oil, the people at large were burdened with both price inflation and persistent unemployment- and under-employment. When the strike by the railway workers for better terms and working conditions took place in 1974, people were in two minds whether to support or oppose it. They seemed relieved that government was able with some firm steps to abort the strike. A far larger political and economic development followed in June 1975, when the government under Mrs. Gandhi declared an ‘internal emergency’, imposed official censoring of press reports (last seen at the height of World War II), and jailed a number of prominent political leaders such as Jayaprakash Narayan, Morarji Desai and others.

64 Eco-Yatra A far larger political and economic development followed in June 1975, when the government under Mrs. Gandhi declared an ‘internal emergency’, imposed official censoring of press reports (last seen at the height of World War II), and jailed a number of prominent political leaders such as Jayaprakash Narayan, Morarji Desai and others.

The immediate provocation for this unprecedented event in India’s constitutional history was the refusal of Mrs. Gandhi to accept the consequences of the verdict of the Allahabad High Court which overturned her election on a petition challenging her election by Mr. Raj Narain, and the subsequent countrywide agitation led by Jayaprakash Narayan and others calling upon her to step down. At the best of times, economic decisions—especially investment decisions—are taken on the basis of ceteris paribus: other things being the same. But everything seemed to be going awry for the country, and this was increasingly telling on its economic growth. The days of the ‘plan holiday’, and of annual plans, which were neither here nor there, between 1967 and 1970, and of relatively sluggish growth seemed to be revisiting the country.

Chapter

6

The Turbulent Years—II

Events seemed to move faster than they obviously did in those days between 1975 and 1977, when improved discipline all around helped consolidate industrial and economic productivity to an extent for about a couple of years. The government under Mrs. Gandhi brought forward some important legislative changes during this time. The first was the introduction and passing of the 42nd Constitution Amendment Bill in 1976, which introduced for all time to come (unless again amended subsequently) the word ‘socialist’ to the definition of the Republic of India; something that Jawaharlal Nehru, for all his interest in, and commitment to socialism—albeit of the Fabian variety—and the founding fathers had not found it necessary to have done. More importantly, the Fundamental Rights to life and liberty, freedom of expression, or of right to livelihood of the citizens (at least nominally ‘sovereign’ under the Constitution) were made subservient to the Directive Principles of State Policy, which dwelt on issues of universal literacy, removal of poverty, improvement of nutrition levels, and so on. Interestingly though, as some commentators at the time noted, the Directive Principles were not justiciable, that is subjected to judicial scrutiny or review under the

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provisions of the Indian Constitution. Thus, possibly some political party in the future could well take the shelter of the Directive Principles to ride roughshod over the Fundamental Rights. Moreover, actions of the President of India were also made largely subject to the ‘advice’ of the council of ministers, so that the ‘embodiment’ of the state, that is the President, and the government of the day could act more ‘in concert’. The Chamber, and most people—Prasad not being excluded—for that matter did not quite know what to make of it. Except for some of the legal luminaries of the day, such as Nani Palkhiwala, who were deeply concerned at the turn events were taking, most people felt that it did not really concern them—that it ‘happened to other people’—and it seemed some sections of the judiciary were quite prepared to go along with these Constitutional changes. At a more mundane level, the government, in the teeth of opposition from the industries and of the different chambers, in 1976 amended the Industrial Disputes Act by introducing a new chapter ‘VB’ under which provision was made for government to become explicitly a party in disputes that were basically about wages and bonus and so on, between the workers on one side and the management on the other. It was also stipulated that any industry wanting to lay-off workmen due to a depression in the market, lack of orders, or financial difficulties, could not do so without the prior permission of the government if it employed more than 300 workers. Earlier, the provision was for a minimum of 1000 workers. The Monopolies Commission set up under the Act of 1970 also set about its task, albeit more in the field of restrictive trade policies that may have been introduced by a company in its selling and distribution network than in any re-structuring or dismantling of a monopolistic set-up that the anti-trust legislation in the US had been able to achieve. In 1976, the Urban Land Ceiling Act was passed. It stipulated the maximum amount of urban land that could be held by a person, and the use that could be made of it—a sort of counterpart to the zamindari abolition and estates acquisition legislation that had been applied in the rural areas since the 1950s. This did upset a good section of urban property owners as it affected their interests directly. But, a

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larger concern was that it seemed at the same time to distort and retard urban development for quite some time to come. There was a line of thinking that with this change of guard more purely Indian concerns would be addressed—as against the Chamber’s earlier thrust towards economic development in a larger context, as part of an evolving world scenario in trade and commerce.

By this time Prasad had once more been forked out of one department and put into another—this time into a motley of small sections concerned with wheat processing, shipping, import and export trade, and supply of steel plant accessories. More significantly, the last of the expatriate secretarial staff had retired or had returned to the UK. Gone too were Gloria Mascerenhas (who had briefly lit up Prasad’s life), and the D’Cruz, D’Rosario and Fernandes families—to Australia or to Canada to build a new life, thus drawing to a close the round of Boxing Day lunches with home-made wine, and delicious Goan dishes like ‘solporel’, ‘vindaloo’, sausage curry and spiced ham. The mantle of the Chamber’s administration had by this time fallen on the shoulders of Mr. N.K. Dutt, the former head of the legal department. There was a line of thinking that with this change of guard more purely Indian concerns would be addressed—as against the Chamber’s earlier thrust towards economic development in a larger context, as part of an evolving world scenario in trade and commerce. While Mr. Parrish had been Mr. Parrish, Mr. Dutt was now addressed as ‘Dutt-saheb’, and he was as close to a saheb as was possible with his weekend round of golf, his cigar alternating with his pipe, and meticulous deportment. On the face of it, the industrial scenario seemed to have improved somewhat, as if the jolt that the ‘emergency’ gave to spiraling demands of the workers, without due regard for the financial situation of the respective industries, seemed to have had some effect of sobering up the more militant sections. The gherao was now a thing of the past. Still, the unrest in the industries continued either overtly or covertly. Of course, in many cases there was genuine cause for such unrest as the employers

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at times did not pay the wages in time, or reduced the annual bonus that the workers had been getting for some years, or did not credit their accounts with the provident fund accumulations, or even because the canteen or tiffin facilities in the factory had been allowed to deteriorate. Even if strikes, lay-offs and closures seemed to have abated, Prasad— and indeed most of the Chamber community—noted that other forms of labour unrest, such as ‘go-slow’, or covert slowing down of the normal or agreed pace of work, without apparently seeming to do so, or ‘workto-rule’, that is, going strictly by the letter of the standing orders or the labour agreement in an industry, or taking casual leave en masse, persisted. It was an uphill task for most managers to cope with these developments and still keep the wheels of industry rolling. Prasad had some first-hand experience with these matters as the wheat processing units that he was looking after had the annual bonus dispute each year, and the wage agreements once in three years. When an industry is subject to a licence for its manufacturing capacity, has a fixed quota of raw materials (that is, wheat in this case) from government, and is subject to fixed selling prices determined by government from time to time, and can sell its produce only against permits issued by the Food Department, there can be only so much that it can do in the matter of salaries and wages. The wage negotiations that Prasad attended from time to time, including sessions with the Labour Commissioner of the state government, and in one case the Industrial Tribunal that was to adjudicate in a wage dispute as per the Industrial Disputes Act, had often a high element of drama and play-acting. The representatives of the labour, and equally those of the management, threw up their respective hands in horror at the ‘unrealistic and unwarranted’ demands put up by the other side. There were lengthy and often impassioned perorations on the plight of the workers on one side, and of the management on the other. There was thumping of tables; and there were walk-outs from the meetings or ‘conciliation proceedings’. There could even be a token strike for a couple of days to establish the severity of the ‘struggle’ for better wages and working conditions. In the end, there was a passing out of sweets when the agreement was eventually signed, thanks generally to some of the

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responsible trade union leaders who knew when to scale down the demands and reach a compromise, and of the management who tried to do what was possible under the prevailing legal and economic conditions. In the context of the prevailing industrial milieu, Prasad recalled in particular the person of Mr. Bagaram Tulpule, whom government appointed around 1974 or ’75 as the General Manager of the Durgapur Steel Plant (a public sector undertaking), despite—or perhaps, because of—his standing as a labour leader. According to the reports appearing in the press, Mr. Tulpule soon came to know about the ‘informal’ arrangements in the plant by which one section or the other of the workmen informed their supervisors—or, if they did not feel up to it, didn’t—and went off to attend a ‘puja’ or the ‘rice-eating’ ceremony of the child of one of their colleagues, and the work schedule could just go and hang. There were ‘work-to-rule’ or mass casual leave by a section of the work force such as the crane operators, or some other, and the production suffered. It was with immense patience and firmness that Mr. Tulpule was able to bring about some semblance of order in the three years he was at the post. Durgapur Steel, which was the pride of Bengal, could again look forward to a period of stability and growth. Otherwise, in much of the trade and industry, and even in the state secretariat and public sector undertakings, it was a case of Ashbo jabo, mainey pabo; kaj korley overtime pabo, meaning that just for attending office, the staff are to get the monthly salary, and if they did some actual work, they were to get overtime payment (which was usually at one and a half times the daily wage rate). Somehow, the idea of a ‘fair day’s wage for fair day’s work’, which had been the practice—or, at least striven for—in large sections of the industry, had been given something of a go-by. Prasad had been required on more than one occasion between 1973 and 1977 to visit the Ministries in New Delhi in connection with his work in the Chamber section dealing with furnace accessories. There was the parent ministry—the Ministry of Industry—and there was the Directorate General of Technical Development (usually shortened to DGTD), which oversaw all technical matters concerning issue of industrial licences, and import licences. These were both housed in the

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huge sandstone edifice of the Udyog Bhavan that seemed to impress the grandeur of the ministries upon the visitor as much as the huge mounds of files that were stacked on the desks of most officers, did. The corridors of Udyog Bhavan were usually chock-a-block with applicants for licence of one kind or the other, or by supplicants seeking some relief from some particularly onerous provision of some regulations. Appointments were hard to come by, as most officers were usually very busy with official meetings of one sort or the other, often being called away in spite of an appointment by the summons of a superior officer or the minister in charge. So, getting appointments and getting into an officer’s room ahead of other supplicants developed into a sort of fine art, with the peons and the steno-typists of the officers concerned, and ‘lobbyists’ of all colours often playing a notable supporting role. The Development Councils and Panels constituted under the Industries (Development and Regulation) Act, and administered by the DGTD did a good deal of work in conjunction with the respective industries concerned in collection of production and import and export data, reviewing the raw materials scenario and, most importantly, for the industries to guide their investment decisions and making reasonable future demand projections. Customs duty and excise duty levels were high, and were often the subject of representations to government because at times they appeared to favour one section of the industry or the other, and at other times seemed at odds with the government policies regarding import substitution and export promotion. ‘Development rebate’—a tax instrument that government had put in place for some years to encourage investment in some specific industries—also generated a good deal of heat as one industry or the other felt left out. At the same time, decisions were taken and files did move and, generally speaking, the policies of government in favour of import substitution and in support of export orientation were followed, even if changes due to technological development could not always be taken on board. Meetings in the North Block on Raisina Hill on the approach to the Rashtrapati Bhavan, with the Finance Ministry officials on customs or excise duty issues had less of a hands-on approach. They were altogether more cerebral, with

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officers with long faces weighed down by the responsibilities of having to tax the nation, staid talk of higher policy issues, and revenue considerations. This contrasted again with the working group meeting for different industries at the Planning Commission, housed in Yojana Bhavan, where there was a good deal of to-ing and fro-ing, with specialists popping in and out of meetings, lengthy theoretical deliberations, and reams of statistics and working reports, mostly on what should be, rather than what would be. Thanks to the specific nature of most of the tax laws, whether it concerned the Income Tax Act, the Central Excise Act or the Customs Act, almost all sections of trade and industry were usually all agog at the time of the presentation of the Union Budget at the end of February each year.

Thanks to the specific nature of most of the tax laws, whether it concerned the Income Tax Act, the Central Excise Act or the Customs Act, almost all sections of trade and industry were usually all agog at the time of the presentation of the Union Budget at the end of February each year. Ears were glued to the radio sets to catch the latest Budget bulletins (television being still some years away), and there would be a general free-for-all in getting the budget papers and the newspaper copies the next day to find out how a particular trade or industry had been affected by the budget announcement. Then would follow the post-Budget memoranda to government and, where possible, meetings with the officers concerned to highlight the industry’s issues. Then another year would roll by. The flurry of legislative activity was short-lived with the defeat of Mrs. Indira Gandhi and the Congress party in the general elections of 1977, and the coming into office of the first non-Congress government under Morarji Desai, followed by about two years of an unedifying spectacle of elderly politicians jockeying for position and power. In the process, however, one thing was becoming increasingly clear: the large farmers who, in the thrust for planned development and industrialisation over the last two decades, had to take somewhat of a back-seat, were now asserting themselves through their elected representatives,

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including the redoubtable Chaudhary Charan Singh. Their principal demand was for more subsidies on inputs, and higher prices for food grains. No doubt they had contributed to the vastly improved food grain production in the country, but now that some degree of diminishing returns had set in, they wanted government to provide the support in terms of subsidies for fertiliser and power, and for higher support, or minimum purchase, price, by the state agencies charged with procurement of wheat and rice from the open market. Prasad was now, for all practical purposes, in charge of his sections, and that brought him in closer touch with his staff and the day-to-day issues of leave, illness, daughter’s marriage, son’s schooling and other hassles that any member of the staff is burdened with, besides generally seeing to it that the day’s work was duly carried out. It possibly helped —and certainly did not seem to hinder—that two of the staff under him were general secretaries of two of the employees’ unions: one, Benoy Chakravarty, an elderly, tall, ascetic and steely person always immaculately clothed in starched white dhoti and panjabi, and the younger, Sanjoy Ghosh, a more ebullient, down-to-earth person. There was also Biren Chatterjee—elderly, wise and soft-spoken—who, on meeting Prasad for the first time, disarmingly asked, as was wont in civilised circles, as to why he had not married till then. On being told that a lack of funds was standing in the way, he laughed out aloud and shared his own experience of getting married on a royal salary of Rs. 45 per month in 1937, and having two grown up sons already well set-up. Kartik Samanta was also there—shifted out from the Engineering Department, with his cool, level-headed approach to both life and work. Independent charge also meant seeing to the annual accounts and tax matters, and here the assistance from Mr. B.N. Chatterjee, the Chamber Accountant and his team of assistants, particularly Kartick Sengupta, proved to be invaluable. There was such a plethora of taxes that it was indeed difficult to keep a steady head in that thicket of tax laws and regulations. Over and above the sales tax ranging from 8% to 15% when one bought any item, or the excise duty of 20% on the manufacture of a product, the customs duty of 160 to 180% on the imported raw

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materials and components used in the manufacture, there was tax on income (ranging from 50% to over 90% depending on one’s level of income, with an initial exemption level of Rs. 20,000), wealth tax, estate duty (when one left this world altogether), and super profits tax (on companies, which at one stage applied if the profits as a percentage of capital exceeded 10%!). It seemed that the government had practically tied up most, if not all, things under the tax net. There was of course a notable exception— there was hardly any tax burden on income derived from agricultural operations. It was similar to how some sections of zamindars and large land holders had sought to get around the estate abolition and the land reforms regulations since the mid-1950s, by splitting their holdings and nominally parcelling them out to near relations, often in a benaami deal, that is, with a relation, or even a servant acting just as a ‘front’. Prasad saw a report at around that time, which indicated that land revenue and agricultural income tax, which had accounted for about 5.7% of the value of agricultural output in 1937 had declined to 3.5% by 1955, and had fallen further to 1.7% by 1970. To be sure this was partly due to the growth of other sources of revenue like excise duty and income tax, so that the share of agricultural tax fell in both relative and absolute terms. But it seemed that political will to tax large land-holders, who in more than one case in some of the states, such as in Bihar and Uttar Pradesh, still held hundreds of acres of land, was missing. Since horticulture was expressly exempt from the estates acquisition and land reforms legislations, it required little imagination, and just a bit of additional effort on the part of the land-holder to convert some of his land ( which was earlier being used for rice and wheat cultivation), into orchards of mango, litchee and the like. If one had a friendly neighbourhood land records officer, this was all the more easy. There was another angle to it. The ‘green revolution’ and the upsurge in cereal output, which relegated famine and the recurring problem of food scarcity to a great extent into history, also led to a considerable strain on the government’s resources by way of the annual increases in the ‘minimum support price’ of marketed grain.

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There was another angle to it. The ‘green revolution’ and the upsurge in cereal output, which relegated famine and the recurring problem of food scarcity to a great extent into history, also led to a considerable strain on the government’s resources by way of the annual increases in the ‘minimum support price’ of marketed grain. By this, the government undertook through the agency of the Food Corporation of India (a public undertaking) to purchase the excess grain brought by farmers into the market at a minimum price calculated on the basis of a sort of ‘cost-plus’ formula as worked out by the Agricultural Prices Commission constituted for the purpose. Over and above this, the government also provided considerable direct and indirect subsidies on water supply, fertilisers used, agricultural credit and, in some cases, also on power supplies. As was only to be expected, with a slow rate of growth of the economy and the consequent lack of buoyancy in tax revenues, the subsidies in one way or the other eroded the resources position of government and, in turn, affected its ability to invest in improving the infrastructure for agricultural production, especially by expanding irrigation and rural power supply, roads, markets and storage facilities. The leveling off of the green revolution by the late 1970s and the inability to extend its benefits beyond the permanently irrigated areas of Punjab and the adjoining areas into the rain-fed areas of eastern Uttar Pradesh, Bihar and West Bengal were ascribed by several authorities to this factor. What is more, it was becoming evident that in many, if not in most cases, the rate of land use and therefore the yield per unit of land did not appear to be directly linked to the farm size. In other words, the intensity of farm operations seemed to drop with increase in farm size. Whether this was due to the large land-holder being satisfied only with only so much of grain that would feed his immediate family, and had left over enough to enable him to buy some industrial or consumer goods, was not clear. Or, was it that the land-holder would employ labour only to the extent landless labour of areas immediately adjoining his land were available, and leave the rest of it fallow, without taking on labour from more distant areas for reasons of caste and other social considerations? The diversion of agricultural land (in excess of

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immediate requirements for food and trade) to horticulture or to fisheries and other uses may also have had something to do with this. There were also some emerging reports that due to disparities in fertiliser subsidy policy, farmers tended to use one type of fertilizer more than the others, thereby leading to imbalance in soil fertility over time. Moreover, the increased use of tractors was becoming evident (from just about 16,000 in 1955 to about 90,000 by 1975)—as compared to the use of unemployed rural labour to the full degree—possibly because of the shorter growing cycle of the new breeds of wheat and rice, and the compulsion to make the land ready in time for a second crop wherever possible. The deficiencies in agricultural infrastructure and in land reforms that would have otherwise enabled the smaller farmers and the tenancy farmers (those who took the land on tenancy basis from a larger land-holder, or who tilled the land on the basis of sharing the crop yield) to put in their best efforts, seemed to be growing apparent by the day. In 1971, the seminal report, Poverty in India, by V.M. Dandekar and Nilakanth Rath, practically blew the lid off the mean status of poverty in the country despite nearly two decades of planned investment, land reforms, and other social and economic measures. It seemed something more, and something different would have to be given a trial if things were really to be changed. Some of these pulls and pressures also showed up in Prasad’s work, particularly in regard to wheat processing for supplying flour and suji (semolina) to the Calcutta and suburban markets. To be sure, the critical ‘ship-to-mouth’ situation of the 1960s in which the mills were allocated wheat only when a ship carrying imported wheat docked at the port, had abated. Wheat stocks through internal procurement from the rural markets were building up with the Food Corporation of India, although at times the mills were still diverted to the docks to pick up imported wheat supplies. The allocation and supply of wheat to each mill (allowed to be set up and operated only with licence from government) was fully controlled by the state government, and the milling companies were forbidden to buy supplies in the open market. Ipso facto, the selling prices of flour and suji were controlled by government, and so also the

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price of bread, which was being increasingly consumed as a snack by workers and the poorer people in the urban and suburban areas in West Bengal. The mills were allowed a notional milling margin per tonne of wheat milled, and even the sale of wheat bran, a by-product in the milling of wheat, was controlled for purposes of sale to animal-feed producers. The allocation and supply of wheat to each mill (allowed to be set up and operated only with licence from government) was fully controlled by the state government, and the milling companies were forbidden to buy supplies in the open market. Ipso facto, the selling prices of flour and suji were controlled by government, and so also the price of bread, which was being increasingly consumed as a snack by workers and the poorer people in the urban and suburban areas in West Bengal.

The repeated meetings with, and representations to the Food Department of the state government, often taxed Prasad’s patience. But it seemed that the situation was changing, albeit slowly, because by the second half of the 1970s government allowed mills to purchase wheat in the mandis or markets of Punjab and Uttar Pradesh (coinciding in a way with the tenure of the Janata government since 1977 which seemed more inclined towards the larger farmers in the area), and transport it in railway wagons. But the quantity that mills could process, and the price control remained in the hands of government. It seemed rather a straightforward ‘heads I win, tails you lose’ situation. The nationalised banks were subjected to considerable strain in this period with specific directions on credit to be extended to different sectors of the economy. At the same time they had to arrange repeated ‘loan melas’ or credit fairs, where credit was handed out to agriculturists, small and cottage industries and the like, to rounds of applause for the political figures who had brought pressure in one way or the other to bear on the banks for this purpose. However, at the same time, the policy for extending credit to farmers for digging wells, building houses or sheds, or taking up dairy farming, and so on, remained mired in red tape. According to reports that Prasad received from some friends who

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lived in the suburbs, some of the bank managers were not above asking for a cut on the loan amount sanctioned, to line their own pockets. The experience of the public at large in the cities in the matter of encashment of cheques, or depositing money was also not very bright. In many branches, the staff often turned up late or browsed through the morning paper, or engaged in heated discussions on the football match of the previous afternoon, while the customers lined up at the counter, waiting for the babu to attend to them. It exposed Prasad—indeed, many others as well—to a sort of tyranny that only the small of mind and training can inflict on the many by virtue of their monopoly of a position, or a facility. New thoughts and ideas however were welling up in India with the Planning Commission making fresh appraisals of the plan programmes, and actual achievements and veering around to the idea that more specific poverty alleviation programmes had to be set in motion to supplement the overall public investment plans. There was also the World Bank Development Report published in 1978, under the guidance of that one person so reviled by the opposition parties of the left—Robert S. McNamara, then President of the Bank—entitled Prospects of Growth and Alleviation of Poverty. This touched on the post-oil shock scenario and the different parameters of growth and reduction of poverty in a number of countries. For the first time, through reports and articles in the press, Indians could learn where exactly their country stood relative to other countries of the world in terms of poverty eradication after more than two decades of planning and huge investment of money and energy. It did not make for a happy reading to learn that India had a per capita GNP of USD 150 compared to Sri Lanka’s USD 200, or Indonesia’s USD 240, or that life expectancy at birth, and infant mortality in 1975 was 50 years, and 122 per thousand in India compared to 68 years and 45 per thousand in Sri Lanka. Possibly, for the first time, India (as also many other developing countries) came to learn from a reasonably independent and objective source on their relative standing with respect to various growth and development indices. It provided a new, but not very happy, perspective on how the country stood way down amongst the various indices of human well-being, be it in terms of infant mortality,

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life expectancy at birth, literacy rates, availability of primary schooling or potable water—something over and above the growth of per capita gross domestic product that had been the lodestone of Indian planning for nearly three decades. The comparative tables served to stress the need for more specific and targeted poverty alleviation programmes than what had been attempted through plan investment and budgetary allocations. The idea that the country needed more and more investment, and that growth would automatically follow such investment obviously needed re-appraisal. As one commentator was to write later, any plan that had been formulated without going into the pros and cons of the feasibility of effective execution, could not be termed as a ‘plan’ in the proper sense of the term. Prasad’s other charges concerning import and export trade, and shipping matters-kept him more than busy. The Red Book—no kin of Mao-TseTung’s Little Red Book that became famous during the cultural revolution in China—circumscribed every aspect of import and export trade. There were items banned for imports, those that were ‘restricted’ and therefore subject to licensing by government, and a handful of items that were on the Open General Licence and could be freely imported. Even some of the permissible items were subject to ‘canalization’, that is, they could be imported only by some of the public sector undertakings such as the State Trading Corporation (STC), or the Metals and Minerals Trading Corporation (MMTC), and some others, and issued to industries against a Release Order granted by government. This required approaches to be made to state Directorate of Industries in case of small-scale industries for the larger industrial units to the office of the Director General of Technical Development of the central government to authenticate the licensed capacity and actual production requirements of the respective industrial units, against which the foreign exchange allocation and the import licence would be granted. This inevitably led to ‘queuing’ for import licences and for Release Orders, with all the attendant delays, additional costs—both accounted and unaccounted—and an overall atmosphere of hassles and harassment. The only positive sign was that government, anxious now to ensure that foreign exchange reserves were built up,

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provided a number of incentives for exports, including sanction of additional manufacturing capacity directed for export production, dutyfree import of raw materials and components against Replenishment Licences, and of course the Cash Compensatory Support to compensate for the burden of indirect taxes on manufacture. This led to a considerable growth of exports in the case of a number of commodities such as tea, jute products, and engineering goods (though mostly castings of all sorts mainly for the Middle East market, which was seeing a lot of building activities since the spurt in oil prices in 1974), and to Soviet Russia. If nothing else, exports provided a window of opportunity for manufacturers to enhance their manufacturing capacity and to strive for better capacity utilization (thus reducing the burden of overhead costs), when little else seemed to work. Of course, the major part of the industries still catered to the domestic market, having to balance their limited options here with the protection from overseas competition. There were however some other straws in the wind. First was the constitution of a committee under Vadilal Dagli, the editor of the Commerce magazine (later developing into the Centre for Monitoring of the Indian Economy, CMIE), to go into the issues of subsidies and controls that government then administered. The report, published in 1978, made a trenchant criticism of both the issues, and brought out how these had not served the purpose, and that the expected benefits did not reach the people they were intended for. The other was the report in 1979 of the P.C. Alexander Committee on the import and export policy and regulations which also made a number of important recommendations for liberalization of the trade regulations. Government had, in 1977, brought forward the Packaged Commodities (Standards of Weights and Measure) Regulations that saw a wave of protests from large sections of both the manufacturing and trading communities in respect of the statutory requirements of marking the date of manufacture, and the weight as packed, on the covers or casing of soaps, detergents, baby food, bottles of jam, and what have you. At least one of the pillars of trading profits that had troubled Prasad in the early 1960s, that of the correct weight and the date of manufacture and stocking, seemed to

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have been taken care of. Within the next few years the second step, of having the MRP or the ‘maximum retail price’ also marked on the packaged commodities helped knock back the second prop, and possibly helped moderate the ongoing price spiral to a significant extent. On some such small legislative measures often depend a load of benefits to the common consumer, who was thus empowered for the first time to know what he was buying, how much of it, and at what price. Calcutta, at the time of independence, vied with Bombay as the premier port of import and export trade of the country. By the 1970s the scene had almost completely changed. The industrial climate in the state for one reason or the other had changed for the worse. Industries were either shutting down or laying-off from their regular production, or were just marking time without any further expansion. Hardly any fresh investments were being made, and it seemed, according to most reports, that businessmen who had earlier made substantial investment in the state, were now shifting base to some of the states in western and southern India. Coupled with this was the gradual decline in the draught of the port—the level of water at low tide—which progressively led to fewer ships of any size to call at the port. This was partly due to soil erosion and the consequent silting up of the bed of the Ganga in the upper reaches, and possibly also to an extent due to drawing of water for irrigation from the Ganga and its tributaries in Uttar Pradesh, Bihar, and West Bengal. There had been talk of having a barrage at Farakka in north Bengal to flush the water of the river Ganga (which at that point turned east towards Bangladesh), down the Bhagirathi river to clear the buildup of silt and sand, and thus increase its navigability, especially during the dry season of January to June each year. It was only in the early 1970s that work actually started at Farakka, and it would be some time before the benefits could be counted. There had also been talk—so often the talk—of having a subsidiary port at Haldia, which was downstream of Calcutta, and could provide alternative mooring for ships with its better draught and navigability. In the meantime, the shipping trade itself was changing. The hold of the shipping conferences, that is of groupings that governed the placement

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of ships of the different lines by rotation at the port, and determined the various freight and port charges payable, was being increasingly challenged by the shippers’ bodies. Far more important than that, the ‘break-bulk’ cargo, that is cargo that was put on board loosely as packed by the exporter in rolls, or packages, or crates for each exporter separately, was being replaced by palletisation. This meant that the cargo had to be packed in wooden crates of specified dimensions and strapped for safety and ease of handling. These pallets were initially put on board the ‘rollon-roll-off ’ type of cargo holds which could literally be rolled on at the port of entry, and rolled off at the port of exit. This was quickly followed by the ‘LASH’ barges, in which the cargo was loaded by the individual exporters in barges, which then were towed to the ship’s side and the cargo lifted physically by heavy cranes on board. But all this was increasingly being replaced by the ‘containerised’ cargo, by which the export cargo, after packing and palletisation, was ‘stuffed’ in warehouses or container stations into hardy, metal containers of specified standard sizes. The container vessels were large and often had to moor farther away from Calcutta, and the cargo had to be taken overland, or by barges or feeder vessels down stream for loading. While this meant that the great tradition of the Hooghly River pilotage would gradually diminish, the development had the considerable benefit of far quicker loading and unloading and, therefore, reduced turn-around time for the ships, with lower port charges, demurrage expenses, lower labour and provisioning costs, and so on. While this meant that the great tradition of the Hooghly River pilotage would gradually diminish, the development had the considerable benefit of far quicker loading and unloading and, therefore, reduced turn-around time for the ships, with lower port charges, demurrage expenses, lower labour and provisioning costs, and so on.

Inevitably these developments led to considerable labour unrest at the Calcutta Port, at times among the stevedoring staff, at times of the warehousing labour, with resulting loss of man-days of work and delays

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in the loading and unloading of vessels. The increasing ‘containerisation’ of cargo also led to the wasting away of the river transport of cargo by barges from upstream jute mills near Khardah, Serampore and Baidyabati. Transport of tea from Assam via East Pakistan (later Bangladesh) by the erstwhile River Steam Navigation Company, and the Indian General Navigation and Railway Company (both of the Inchcape Group) had ceased for some time (replaced for a while by its successor, the Central Inland Water Transport Corporation, a public sector undertaking) as the container loading station at Amingaon near Guwahati came up, thus vastly reducing the handling expenses, damage in transit, and other problems. But all this did mean a considerable change for the people who had been involved, possibly for more than one generation, in these trades. The straws in the wind that appeared with the reports of the committees under Vadilal Dagli, and Dr. P.C. Alexander seemed to strengthen the thesis for a more open, liberal and export-oriented approach to the country’s development, in place of an importsubstituting, inward-looking ‘command economy’, that Dr. Jagdish Bhagwati and Dr. Padma Desai had put forward some eight years earlier. It was to be seen what changes in policy the government would bring about over time. Some changes had been wrought in the field of the stock markets. Attempts were made to place the management of the stock markets on more modern and efficient lines. Fresh thought was given to new instruments for raising funds from the markets rather than relying entirely on the commercial banks. The ‘convertible debenture’ came into being providing investors with some minimum returns before the undertaking became profitable and started yielding dividends. Consequently, there was a sizeable growth in the equity market. Whereas, between 1949 and 1979, the annual average amount of money raised in the equity market was only Rs. 58 crore, this swiftly rose to Rs. 529 crore. in 1981-82, and to Rs. 1000 crore. in 1983-84. The Indian economy had not quite seen anything of this scale before. But time and tide wait for no man. Overwhelming whatever fresh thinking that was going on in regard to economic policies, the country

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suffered a major drought in 1979. And oil prices, the increase of which in 1974 had seemed such a nightmare, rose inexorably from USD 13 per barrel in 1978 to USD 34 by March 1981, with all attendant adjustments to be made by the country and the people, with the wholesale index of prices rising by about 18% in 1979–80. The only saving grace seemed to be that the inward remittances by Indians working in the Middle East and elsewhere rose from USD 1.2 billion in 1978–79 to USD 2.7 billion in 1983–84, thus moderating any impact on the balance of payments, and making the adjustment process somewhat easier than before. In January 1980, the Janata government fell amidst much squabbling, and Mrs. Indira Gandhi once more assumed charge of the central government.

Chapter

7

Winds of Change

In June 1980, Sanjay Gandhi, who for nearly eight years had been at the side of Mrs. Gandhi, and had quite a few acts of omission and commission to his account in the political and economic administration of the country, died tragically in a plane crash. The grieving mother turned to her elder son, Rajiv, for succour and support. He was a pilot in the Indian Airlines (a public sector undertaking) and was more at home in the cockpit and was quite reluctant to leave all that for the hurly-burly of Indian politics. But still he came to his mother’s side with his election to Parliament in 1981. Soon, signs of change began to show. He progressively sidelined some of the political aides who had gathered around Mrs. Gandhi over the years, brought together some younger political figures on to the centre stage, and began increasingly to talk about technology as an engine of development. This was not a particularly novel concept, for, as Prasad recalled from his undergraduate days studying economics, Joseph Schumpeter had propounded the concept of innovations and technological development as an instrument of getting over the periodic business cycles that affected most economies. Still, in India, this idea had not really found widespread acceptance at that time.

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There was something in the chemistry between Rajiv Gandhi and Pitroda—a meeting of minds—that saw a completely new growth paradigm being born, drawing on technology development, and application of computers, electronics and telecommunications for the development of the country. There was more of the drawing board, circuits, transistors, chips, optical fibre, and satellite communications (in which India had already made considerable progress since the launching of the Aryabhatta in 1976).

In 1982, a stocky, prematurely white-haired person, Sam Pitroda, born in the state of Orissa, settled in the USA, with years of experience in electronics and telecommunications, was given an appointment as Adviser to the government. There was something in the chemistry between Rajiv Gandhi and Pitroda—a meeting of minds—that saw a completely new growth paradigm being born, drawing on technology development, and application of computers, electronics and telecommunications for the development of the country. There was more of the drawing board, circuits, transistors, chips, optical fibre, and satellite communications (in which India had already made considerable progress since the launching of the Aryabhatta in 1976). It was about connectivity and communications, as if, Prasad wondered while glancing through the morning newspapers, this could take the place of enterprise and investment to trigger the growth process. But it did; it did. For one, there was a universal sigh of relief from the citizens with the introduction of computerised railway bookings spearheaded by Madhavrao Scindia, then Railway Minister, and one of Rajiv’s youthful group of administrators, in 1984. Starting with the metropolitan cities, and quickly extending to the divisional headquarters of the railways system and other major towns, at a stroke it relieved the people of the uncertainties of railway travel—especially with reserved accommodation—and the ignominy of having to grovel before the railway staff for a place in the coach. That small postcard-sized computer print-out giving particulars of the sex and age of the traveler, the train number and date of travel, the coach and seat number gave a sense of identity for the first time to a

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nameless person from some wayside station, who had been, at most, provided only by the patta or official certificate of one’s land and possessions; for, birth and death certificates in the depths of rural India were the exception than the rule. There was talk about computerisation of banking operations, and some of the overseas banks, emboldened by this discussion and airing of official views, started progressively to put this in place. All this was anathema to some of the political parties in opposition, and they began a long period of agitation to put computerisation of the railways and the banks on hold. It would not do at all, they said, in these days of burgeoning unemployment, to use what was termed as ‘such laboursaving devices’ in trade and industry. They were right in a sense for—as Prasad ascertained from official reports—employment in the period 1976 to 1986 had grown only by about 2.4% per annum in the organised industry against a population growth of about the same. The government and the public sector of course had a relatively better record with a growth of employment of over 6.67% per annum for the period 1961 to 1981. It was a moot point of course whether the industrial licence and import controls, which still persisted, the high level of direct and indirect taxation, and the provisions of the Industrial Disputes Act would really allow for the level of growth—and growth with increasing employment in the organised private sector—that the country needed. Secondly, as Prasad found in the course of meeting different people, that possibly, as a consequence of the slow growth of employment in the private sector, an unusually high premium was being placed by people on government jobs. They would beg, borrow or steal if required to get a government or public sector job. Once in, they swiftly made it a sinecure, rather than a good and reliable provider of public goods and services such as steel or cement, health, education, finance and so on to the people. Moreover, even if one went along with the government’s overall policy to establish import-substituting industries (rather than export-enhancing sectors) it was often brought home to Prasad by many of the member-companies that the customs duty on the import of raw materials or components to produce such an import-substituting

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equipment in India was often more than the duty payable on the import of a finished item of such equipment. The policy could not therefore, in many instances, be said to have been consistently and effectively pursued. It was also around this time that words like ‘rent’ and ‘rent-seeking’ began to show up in public discussions on government and administration. Rent, as Prasad and most others knew, was what you paid when you took a house or flat to stay in. Prasad, though, vaguely remembered from his economic textbooks that he had left behind some two decades earlier, that ‘rent’ as ‘economic rent’ represented the extra amount extracted by a person (over what would be payable for the best possible alternative use or utility of a thing or a service) from another, owing to his control over or access to something. It could be a thing or a service that was limited, or was made to appear limited, in availability at a point of time. This could, and did, occur under conditions where competition was restricted and monopolies were allowed a free hand.

It was also around this time that words like ‘rent’ and ‘rent-seeking’ began to show up in public discussions on government and administration. Rent, as Prasad and most others knew, was what you paid when you took a house or flat to stay in. Prasad, though, vaguely remembered from his economic textbooks that he had left behind some two decades earlier, that ‘rent’ as ‘economic rent’ represented the extra amount extracted by a person (over what would be payable for the best possible alternative use or utility of a thing or a service) from another, owing to his control over or access to something. It could be a thing or a service that was limited, or was made to appear limited, in availability at a point of time. This could, and did, occur under conditions where competition was restricted and monopolies were allowed a free hand. That is why, Prasad had learnt, competition was good, for it reduced the element of rent to a point where the price paid by a consumer of a product or service approximated its usefulness or utility to him or her. But how could government be a ‘rentier’ and be extracting this rent from its own citizens? Well, the fact of the matter, as Prasad realized,

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was that the very process of implementation of a government policy by bureaucracy at one level or the other by way of approvals or disapprovals (which were time-consuming) at the satisfaction and discretion of the officer concerned in the issue of permits or licences, or even the very acceptance of an application generated rental income which accrued to some sections of the bureaucratic and allied classes. This took the form of cost in terms of money (as ‘palm greasing’, ‘speed money’, gifts, or illegal gratification of one sort or the other), or in terms of time, or usually both. The cost accrued to the citizen, and the benefits in terms of the money, or gifts or some favours, were harvested by some elements of the administration. People had long been inured to this sort of petty corruption in most government offices, which now had the benefit of an economic theorisation. Whether popularly known as “corruption”, or more elegantly as ‘rent’, this usually led to misallocation of investible resources of time and money, and reduced the effectiveness of the tax system. And, in turn, it affected the growth of tax revenue, with obvious budgetary implications. But this extraction of rent was fairly widespread and, according to one eminent commentator, many among the educated and socially mobile political and administrative sections since the 1950s, by diverting attention and resources from primary education for the masses had, in effect, attempted to safeguard the ‘rental’ value in society and the economy arising from their ‘scarce’ resource of higher education. Competition—competition in every field, and at every stage—suddenly seemed to be the only panacea. That seemed to be the commonsense view. But it would take time, for vested interests that had once been confined to the landed and capital-owning classes in political dialogue and discourse since the early 1950s, now seemed to have extended into the pillars of administration. It had been widely accepted in both academic and administrative circles that a fundamental issue of economic growth in India was that, if the level of income across the country cannot be raised, then the desired level of rate of saving, and thus investment in industry and infrastructure, cannot be achieved. It was true that gross domestic savings in the country,

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as some documents of the Planning Commission described, had risen from only about 12.8% at the end of the First Five Year Plan in 1956 to more than 23% by the end of the Fifth Plan in 1979. But the disturbing aspect was that this increase in savings was mostly in the private sector, and not in the state or the public sector, which could provide the resources for investment in land and infrastructure. The thought that P.C. Mahalanobis had once expressed, that the growth and surpluses generated by the public sector units since the Second Plan would themselves provide the necessary funds for further, future, public investment was far from being realized. The intermediation of the public sector banks, which largely held private savings, saw to it that plan financing was duly achieved through a growing load of deficit financing. According to the government’s statistical reports, the level of deficit financing had been about 17% of the planned investment during the First Five Year Plan, rising sharply to 21% during the Second, falling over the next couple of plans, and rising once again to more than 19% in the Sixth Plan, which kicked off in 1980. The other striking development in the early Eighties was the rapid strides in telecommunications. At the beginning of the Eighties, there was usually a long queue for getting telephone connections from the public undertakings, and there were usually hold-ups of more than a couple of years before the connection was physically available. Prasad recalled the days of the 1950s when telephones were still manual, and one could make a call when an operator from the telephone exchange answered, and the phone number had to be called out for a connection to be made. Long distance calls were a nightmare, with “bookings” having to be made via the operator—on normal or ‘urgent’ basis—against a docket number, and it was a toss-up whether the call would materialize that afternoon or the next day. The coming of the automatic exchanges in the 1960s had been some improvement, and a subscriber could make any local calls with much less difficulty, but long distance calls—so necessary to any industry or trade—were still at the manual, ‘operator’ level. There had been considerable beating of breasts in previous years that the telephone density, (number of telephones per thousand of the population),

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in the country was very low. Of course it was low; so were so many norms of development conventionally accepted, such as use of electricity, consumption of steel, the number of doctors, number of teachers per thousand population, and what else. Pitroda brought thoughts out of a hat—let us think of ‘accessibility’ to telecommunications, rather than the physical possession of telephones, and thus was born the concept of the PCO, or the Public Call Office. In one stroke, a villager in Bihar could call up his son working in Maharashtra, and convey some urgent message. A trader could check up the crop position and prices in another state by just walking across to the nearest PCO, and so could any small businessman wanting some raw materials in a hurry. In short order, the number of PCOs and, therefore, the number of telephones available to the public at large—even if they did not physically own it—rose from about 10,000 units in 1978 to more than 30,000 by 1985. As one of Prasad’s friends aptly put it, the neighbourhood PCO saved a physical journey of possibly two or three hours to know about an ailing relation, or to call up a doctor, which could now be done in a matter of minutes, thereby allowing for huge savings in man-hours and physical effort over a period of time. Courier services to supplement the usual postal network and private security services also came up around this time, helping in employment of urban youth. Time, which in India had so long been taken almost for granted, was now being increasingly appreciated as an element of cost that could be put to better, alternative uses. Time, which in India had so long been taken almost for granted, was now being increasingly appreciated as an element of cost that could be put to better, alternative uses.

Although computerisation was being bandied about as if it would by itself solve all the problems, the systems were still undeveloped. In 1978, when computers first touched the shores of India, there were no hard discs. The machines and programmes ran on the large format floppy discs based on the MS-DOS. It was only after about another five years or so that personal computers with 20 MB hard disc with 2 MB RAM came to be used.

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The turn of the decade saw a remarkable growth of self-help groups and non-governmental organisations all across the country. It was as if the people in their own way were saying that they would help themselves if the government found it difficult to do so because of budgetary or administrative constraints. One of the foremost was the Kaira Milk Cooperative in Anand, Gujarat, which helped build the well-known ‘Amul’ brand. Then there was SEWA, or the Self-Employed Women’s Association spearheaded by Ella Bhat that started doing yeoman work in Gujarat—and later expanded in other states—to provide means of livelihood to women, and thus help them to help their families and provide a better and more meaningful life for themselves. There were Chandi Prasad Bhat and Sunderlal Bahuguna in the Garhwal-Kumaon region with their ‘Chipko Andolan’ working for conservation of forest cover, which provided fuel and fodder to the common people and helped protect the water regime of the hilly areas. There was ‘Sulabh Shouchalay’, the cheap but effective sanitation facilities, the blueprint of which had been drawn up and implemented for about a decade by Bindeswar Pathak, first in Bihar and then in other states. Annasaheb Hazare was working on watershed management in the drought-prone regions of Maharashtra to improve the water regime and thereby improve the lot of the farmers. These men and women became the ‘role models’ for other NGOs. The year 1984 also saw the publication of the seminal report on the environment in India by Anil Agarwala. The work of the NGOs, and the Agarwala report brought into public focus, and into hard reckoning the contribution of the ‘informal’ and ‘unseen’ sectors to the national economy, and the costs and benefits of conservation and pollution control. More formal measures aimed at structural adjustment were also underway, this time led by West Bengal, in the field of that persistent concern: land reforms and land tenure. ‘Operation Barga’ had been launched in 1978 to record the names and rights of share-croppers (bargadar) in the state, and provide a degree of security of tenure that would enable them to invest money and effort to improve output levels and generate higher incomes for themselves. In quick time, over one and a half million share-croppers had been provided with official record and

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recognition. This was not by any means an exhaustive exercise. It was confined to a few districts of the state; but it certainly made some difference as agricultural growth in terms of at least cereal output in the state surged, and pulled up the overall agricultural scenario in the country as a whole, when it seemed to be languishing. Two crops in a year became the rule rather than the exception, with increasing resort to ground water usage with diesel pumps as Prasad often saw on his short outings, particularly in the districts of Burdwan, Birbhum, Nadia and east Midnapur. But towards the end of the Eighties, the inevitable law of diminishing returns had set in, and the rate of growth of rice and other crops settled back to a more sedate pace. West Bengal (under a Left Front government since 1977) led off— also in 1978—with a model of decentralised administrative and financial powers through the institution of the ‘gram panchayats’. Panchayats or village councils had been functioning in India almost since time immemorial, though mainly in connection with social issues of marriage, divorce, land disputes, caste problems and so on. Gandhiji had been a strong votary of panchayats as a form of grassroots level of village administration, and as an instrument of social change. Prasad recalled that P.C. Sen, the Chief Minister of West Bengal between 1962 and 1967, who had been a victim of a virulent hate campaign by the opposition parties, had also pushed for social and economic development through the panchayats. But he had not made progress mainly on account of political opposition and his idea of ‘partyless’ elections to panchayats; that is, he did not favour introduction of the cut-and-thrust of party politics into what, in his mind, were completely local, village-level issues of setting up a primary school or a health centre, alignment of a road or an irrigation channel, or bringing electricity to the village, and so on. Panchayat elections were held from time to time under the aegis of the Left Front government, but the picture seemed to be confused as to whether political and social development at the village level had been at the cost of the more purely economic. The Union Budget in 1983 considerably liberalised the provisions for investment by non-resident Indians (NRIs) in Indian companies.

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The government had realised that Indians settled abroad, in the US, UK or elsewhere had prospered professionally and financially and, if induced with suitable schemes, could make substantial investment that would serve to supplement the domestic savings and capital, and pave the way to higher rate of economic growth. But it was soon realized that it would not be roses all the way. In 1983–84 a major controversy erupted on the attempted takeover of Escorts (of the H.P. Nanda group), and of DCM (of Mr. Bharat Ram) by Mr. Swraj Paul of the Caparo group in the UK. Apparently, overseas investment was all right, but takeover of management as a consequence of such investment was a ‘no, no’. There was a tremendous flurry of activity, court cases, pleas to government and all that and, ultimately the Caparo move fell through. Within about a couple of years another major controversy arose with the attempted take over of the well-known business house of Calcutta, Shaw Wallace and Company, by an NRI, Mr. M.R. Chhabria. Once again representations and court applications flew around, but Mr. S.P. Acharya of Shaw Wallace apparently did not enjoy the goodwill and support of government and shareholders to the same extent as Mr. Nanda or Mr. Bharat Ram did, and soon the company came under the management of Mr Chhabria. Shortly thereafter, he also took over the Dunlop Company, the well-known tyre manufacturers. These cases brought home sharply to both government and the Indian businessmen that overseas investment came often with a management tag attached, and this issue would have to be addressed and resolved if India was to continue to attract NRI and other overseas investment. Since Prasad was more or less in charge of the sections attached to him, he had to deal with staff matters more and more. There was Ramjatan Mishir (or Mishra, who was known to be already over 65 years of age although he claimed to be only 54 years) came to tie ‘rakhi’ on Prasad’s wrist and ensure a gratuity of Rs. 50 as well as advance salary for going ‘home’ to Darbhanga to tend to his land. There was Maheswari Singh who did a bit of money-lending amongst the peons and durwans of Dalhousie Square, and was often missing from his post as he went out on his ‘collection rounds’. There was Raghunath Prasad who dutifully sought a month’s leave in July each year to go ‘home to repair his house’,

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and each year overstayed till September, quite oblivious of the ‘leave without salary’ that he was subjected to. Each of them had land back ‘home’ in Darbhanga, or Chhapra or Muzaffarpur that was tended by a brother, cousin or a nephew, and they ensured that it was properly tilled and the harvest was brought in, with the occasional financing being done—via the Money Order—from his post at the Eastern Chamber. So, there was privilege leave, sick leave, casual leave, leave without pay, unauthorised leave and various permutations and combinations of all this to be tackled almost on a daily basis. Added to this was the growing numbers of ‘domestic enquiries’ into petty breaches of staff discipline such as habitual late attendance, disappearance of sugar stocks from the ‘tea room’, and the occasional cases of insubordination. Increasingly, also, Prasad found himself being required to monitor the ‘overtime’ payment to staff, which inevitably brought him up against the occasional difference of opinion with the staff concerned, and the union. He was to learn over the next couple of years that all this had a ‘higher purpose’. There were at the same time more opportunities opening up, and Prasad found himself in May 1983, strapping himself down in a huge Boeing 707 on way to Japan with an official delegation from his furnace accessories section to explore possibilities of technical collaboration. It seemed almost unreal: the repeated trunk calls to Bombay, the hours of agonising wait before the foreign exchange permit from the Reserve Bank of India arrived in the afternoon of the day they were to take the late evening flight out to Japan, and now the ‘fasten seat belt sign’ had come on, and the huge plane slowly taxied on to the runway. It was a great experience for Prasad to have been able to visit Japan (it was his first trip abroad) and see for himself the level of development in that country, the technological capabilities, quality control systems, packaging and so on. It did serve to change the perception of many in the industry towards better products, better quality control, better design and application engineering facilities. The barriers to trade and technological collaboration—the scope to choose the best that was needed for the proper development of an industry in India, rather than some outdated technology that used to come over the previous two decades-were coming down. All this had

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usually come earlier hand-in-hand with the ‘tied’ aid; that is, financial assistance linked with purchase of equipment and machineries from the donor country. The Abid Hussain committee on foreign trade policy also made useful and positive recommendations. Another opportunity came Prasad’s way in the spring of 1984; but it also led to some far-reaching changes. The health of Mr. Dutt, the first Indian secretary to the Eastern Chamber, had been deteriorating for a couple of years. He had been almost 60 years of age when he had assumed office, a trusted and loyal servant of the Chamber, and, who better to manage it as the expatriate secretarial officers left India in the early 1970s. But he was not getting younger, and while his goodwill with a large cross-section of the member-companies remained unaffected, his grip on the internal administration of the Eastern Chamber seemed to be slipping. More and more adhocism seemed to be creeping into the administration, which at one time had prided itself on its strong traditions and systems. Some of the senior secretarial staff appeared to be inclined to carve out their own private fiefdoms, making known and unknown deals for additional allowances and perquisites with the managing committees of the respective industrial or trading sections they were nominally in charge of. The successive presidents of the Chamber had hardly any inkling of the decay and deterioration that was worming its way into the innards of the organisation, preoccupied as they were with the issues of the day, and their personal likes and dislikes. Mr. Dutt had been happy to hold their hand and pander to their foibles and inclinations. His membership of the clubs and some of the other institutions in the city came in useful; useful only to an extent. By about the middle of 1983 he had fallen seriously ill and Mr. S.K. Chakravarty, who was then the senior-most secretarial officer—a straightforward and matter-of-fact person—had been asked to officiate as secretary. The finances of the Chamber had also deteriorated to a serious extent and Mr. Chakravarty asked Prasad to help out with the Accounts Department and see that the cash-flow was stabilised, if not improved. Prasad did what was possible under the circumstances; for mergers and resignations by companies had left the options rather limited.

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In March 1984, Mr. Chakravarty, as the de facto in charge of the administration, sponsored Prasad for a course in export promotion with a well-known European institution, and he himself left for a fortnight’s lecture tour in the US, which, as some later reports had it, had been induced by one of his friends and colleagues, who possibly had less than friendly intentions. The upshot was a huge furor, for precisely what reason was not clear as there had not been any financial or administrative crisis in the meantime. It was two weeks in any case, and Mr. Chakravarty was summarily dismissed from service. Prasad was also brought under the scanner and grilled for some time but escaped relatively unscathed for the reason that Mr. Chakravarty, the acting ‘In-charge’, had officially granted his leave of absence. It was a rude introduction for Prasad to the intra-office machinations that he had largely been spared so far, and which had permitted him really to devote himself heart and soul to the growth and development of the different sections he had been put in charge of. These administrative changes led to some more resignations by some senior secretarial officers and Prasad soon found himself kicked part of the way upstairs, with the additional charge of the section that dealt with the purchase and sale of tea in the Calcutta market. This was a pretty large assignment, what with a large number of buyers and sellers of tea, and a plethora of rules and regulations and the weight of longstanding practices in a traditional trade. It also brought him face to face with traders acting on behalf Russian parties who were by far the largest single buyers of Indian teas—thanks to the terms of the Rupee-Rouble trade. While some flexing of muscles was understandable with the large purchases some of these trading houses made, it took Prasad some time to understand their concern for developing a particular and larger constituency within the trade. In October 1984, the Prime Minister Mrs. Indira Gandhi, was brutally assassinated following some of her measures in Punjab earlier in the year. The country was in utter turmoil for a couple of months, before Rajiv Gandhi became the Prime Minister in January 1985 with a huge majority for the Congress party, and the administration could again assert itself. Rajiv seemed to be convinced that the country required a

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fresh look at the policy measures so far used for economic development in the country, and spoke out explicitly about the cancer of corruption that was eating into the body politic. He drew attention to the fact that government spending to assist the rural poor was ineffective due to the enormous leakages that were taking place along the administrative setup; only about 15 paise, as Rajiv Gandhi put it, out of every rupee spent by government really reached the poor. He felt that communications and information technology, which had been inducted to an extent into the administration since 1983–84, held out the promise of being a “force multiplier” to enhance the productivity of investment and assets. He brought a whiff of youthful energy, and a breath of fresh thought to the national scene. At the time of presenting the Union Budget in 1985, the Finance Minister, Mr. V.P. Singh unveiled the Long Term Fiscal Policy that marked a change from the high rates of income tax that had peaked at more than 90% in 1973 for annual personal income levels of Rs. 2 lakh or thereabouts (but since then reduced to about 60% on an annual income of about Rs. 60,000). But more importantly, the policy laid out a roadmap for rationalisation and simplification of taxes and duties all around. At the same time, positive incentives were given for exportoriented industries by way of a 50% deduction in taxes on profits arising from export sales (increased to 100% in a couple of years) and providing duty-free import of capital goods for a number of ‘thrust’ industries. Equally important—from whatever feedback that Prasad received from his friends in the industry—was the gradual dismantling of administrative controls over commodity prices since 1985, with sugar, then cement, being moved from 100% price control to a regime where 50% of the production was earmarked for government allocation at fixed prices, with the balance 50% free for sale in the open market. This was a considerable measure of relief, and led the way for successive increases in investment in additional production capacity of these industries. But a similar unlocking of market forces and investment in some other industries like steel, coal and non-ferrous metals took some more years to come about.

98 Eco-Yatra The philosophy of siphoning off of savings and assets of the middle and higher economic classes that had been the order of the day since the 1960s, had not yielded the desired growth of the economy. Some further measures to widen the tax base were now called for. A report, later in 1985, by Mr. M. Narasimhan, a senior economic administrator, called for a progressive changeover from physical controls exercised by government over economic activities to a regime of monetary and fiscal regulations. A number of policy changes to liberalise industrial licensing were also undertaken.

The philosophy of siphoning off of savings and assets of the middle and higher economic classes that had been the order of the day since the 1960s, had not yielded the desired growth of the economy. Some further measures to widen the tax base were now called for. A report, later in 1985, by Mr. M. Narasimhan, a senior economic administrator, called for a progressive changeover from physical controls exercised by government over economic activities to a regime of monetary and fiscal regulations. A number of policy changes to liberalise industrial licensing were also undertaken. Something of a small miracle was also working up in Haryana as the Maruti factory, once promoted by Sanjay Gandhi, and now a public sector unit in collaboration with Suzuki Motors of Japan rolled out its first small car, the Maruti 800, for the Indian public. While the vehicles produced by Hindustan Motors (the sturdy Ambassador) and Premier Automobiles (the Fiat 1100) had served the public well enough for three decades, extraordinary quality and efficiency standards, and innovative management of men, materials and production, besides new engine and suspension design concepts made the Maruti 800 something quite unique in the country. The public responded enthusiastically, and soon it was as ubiquitous on Indian road as the Ambassador and the Fiat had been. It was small, no doubt, and suited only small families, and Prasad sometimes thought, the ambition to own a Maruti 800 would possibly, in course of time, lead to small families more widely in India. Coupled with this change came a general desire for mobility amongst

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the Indian public. Mopeds (that stood somewhere between a cycle and a scooter), scooters, motor-cycles that suited all pockets and purposes began to be widely produced and used. Often in rural areas, farmers could be seen taking their produce to the market loaded on a moped or a motor-cycle, rather than carried as a head-load or on bullock carts. It was a change spurred by a widespread desire for change as Rajiv Gandhi sometimes put it, and indeed embodied it with his Gucci shoes. To want some material thing or comfort (in India long known for its penchant for other-worldly philosophies) and to work hard for it was not necessarily bad. In Prasad’s reckoning however, a most important step that had been demanded for years by the industry was taken in 1986, when government, in a small and tentative step, introduced the concept of MODVAT in respect of central excise duties on domestic manufacture. Till then, the central excise duty was paid at the factory gate on manufactured goods before their dispatch to various customers. This “manufacture” not only covered the processing and conversion of inputs and raw materials into a finished or semi-finished product, but any additions or alterations by attachment of accessories, controls, and so on, and even included packaging. With the central excise being levied at each such stage, the duty element had what has been called a “cascading effect” by way of taxing a part that had already been taxed. This extended even to items that had been self-consumed, that is, produced in one part of the factory and used in another part of the same plant or division. For instance, semi-finished steel such as a slab, when dispatched from a steel plant attracted excise duty. When this was processed by a re-rolling unit to make plates or sheets and was in turn dispatched by it, there was again tax on it. When this sheet or plate turned up at a fabricating shop for making a steel vessel, it was further taxed on dispatch. And there was one further tax level when the vessel was finished with additional piping at another factory before final dispatch to the customer having a chemical plant. His chemicals were, in turn, taxed before they were used to make, say, detergents, which were again taxed before sale to the final customer, who in all likelihood had to pay some state sales tax on the product.

100 Eco-Yatra The MODVAT scheme tried to address this problem, starting with a range of commonly used inputs and raw materials, so that a processor or manufacturer could get due credit of the duty paid on the input in calculating the duty that he would have to pay when dispatching his semi-processed item to another manufacturer. This served to bring down operating costs and reduce working capital requirements, besides reducing litigation and paper work.

The MODVAT scheme tried to address this problem, starting with a range of commonly used inputs and raw materials, so that a processor or manufacturer could get due credit of the duty paid on the input in calculating the duty that he would have to pay when dispatching his semi-processed item to another manufacturer. This served to bring down operating costs and reduce working capital requirements, besides reducing litigation and paper work. This measure was heartily welcomed by all sections of the industry. It had perhaps to an extent, together with liberalization of the industrial licensing provisions, led to a spurt in growth of the economy between 1983 and 1988. Things could work, it was felt, and there was an air of optimism all around. This air of hope and expectancy did not however last too long and, by 1986, political tensions seemed to have accentuated and, Rajiv Gandhi, rightly or wrongly, was being targeted by the opposition parties for corruption in connection with purchase of Bofors artillery guns from Sweden for the defence services. Policy initiatives were again put on hold while Rajiv battled for his political survival. Mr. V.P. Singh, once considered Rajiv’s right-hand man, turned against him and joined the opposition chorus for Rajiv’s ouster. Could it be that one who had spoken out so strongly against corruption was himself implicated directly or indirectly in alleged receipt of commission in the purchase of the artillery guns? People became confused and de-motivated; what would happen to them if this infighting carried on and issues of health, education, and livelihood were put aside? They did not have to wait long. In 1989, Rajiv was forced to resign and, following the elections, V.P. Singh became the Prime Minister with support from an unreal coalition of political

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parties ranging from right nationalists to the leftists. It lasted for little more than a year before internal pulls and pressures brought it down and another government was cobbled together under Mr. Chandrasekhar, the former “Young Turk”; but now not so young. But he too fell by early 1991. In the meantime two other momentous events had their effect on India. The first was the sudden break-up of the Soviet regime in Russia in the middle of 1989. Some elements of “glasnost” and “perestroika”, or liberalization and re-structuring, had been under way for a few years under Gorbachev, the then Secretary of the Communist Party of the Soviet Union. Suddenly it seemed that all the expectations and aspirations of the Russian people boiled over, and in no time the statue of Dzerzhinsky, who had once headed the notorious state police, NKVD, lay in the dust. The Berlin Wall fell shortly thereafter, and the East European countries, one by one, threw off the Communist regimes that had governed them since World War II. Much of the political thinking and calculations that had guided Indian political and economic considerations over the preceding three decades or more received a major shock with these events. Also, the first Gulf War started as Iraq invaded Kuwait in early 1990, and the USA and other western countries became closely involved in the conflict. The immediate impact on India was that the supply of oil became a casualty, along with its equations with the Arab countries. Things could no longer be viewed in terms of the earlier perspectives, and India could not insulate itself from these changes. Possibly because of the adjustments necessary to bring into being the Long Term Fiscal Policy, or perhaps because of the higher government spending on social programmes, or because of higher administrative costs since the early 1980s the revenue deficit (the gap between the revenues generated by government and its current revenue expenses) had climbed from 1.42% of the GDP to about 2.49% by 1988–89. The overall fiscal deficit (that is, the difference between all the receivables of government, including loans, and the capital and revenue outlays) also rose from 5.77% of GDP to 7.34% over the same time period. Of course a good part of this was accounted for by the financing

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requirements of the Seventh Five Year Plan (1985–90) and its Rs. 2 lakh crore approximate outlay was largely borne by market borrowings of government (52.71% of the plan funding) and by deficit financing (commonly understood as the printing of money) to the extent of 14.43% of the estimated outlay. What was worrying to many concerned with the fundamentals of the economy was that the consolidated fiscal deficit of the centre and the states rose from 5.7 % of the GDP to 9.7% by 1984–85. Government debt rose from 17.7% in 1984–85 to 24.5% of GDP by 1989–90, and interest payout on the government debts increased from 18% to 27 % of its revenues over the same period. As some economist friends of Prasad put it, government seemed to be basically using the savings of the private sector to finance its own consumption by way of salary and wages and other revenue expenses. Therefore, its investment in public services such as irrigation, power, communications, education, health, etc., was limited to that extent. At the same time, the employment scene was not encouraging with live registers in the employment exchanges rising from 17 million in 1981 to 30 million by 1988. The organised sector (combining both public and private employment) accounted for only about an additional 5 lakh jobs over the same period. More distressing was that the price situation seemed to be worsening with the annual rate of inflation, which had come down from 13.2% in the years 1971 to 1981 to about 7.6%, inching towards the 10% mark. Was it then, Prasad wondered, that in India the more things changed, the more they remained the same?

Chapter

8

A New Chapter

In May 1991, while on an election campaign in Tamil Nadu, Rajiv Gandhi was brutally assassinated by some Sri Lanka Tamil militants. A promising political personality was cut down before it had time to flower. Following the May 1991 national elections, Congress just about scraped through to power with the backing of some regional parties. The mantle of prime ministership of India fell on a most unlikely person: P.V. Narasimha Rao, an aging, unwell, former Congress minister, without any particular achievement that could be put readily to his account, who was quite happily looking forward to his retirement from politics. He was known for his characteristic thoughtful pout and long silences as he listened to others, or thought through a sentence he was about to utter. Whether by intuition or art, he chose Dr. Manmohan Singh to be the Finance Minister in his Council of Ministers. Dr. Singh had received his doctorate in economics at Cambridge University on the role of external trade, and had served in many distinguished posts—from a professor of economics at the Delhi School of Economics to being the Finance Secretary to the Government of India, the Governor of the Reserve Bank of India, Deputy Chairman of the Planning Commission, and Secretary

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General of the South-South Development Cooperation, a major international initiative for promoting trade and commerce among developing countries. At that time, that is, at the close of 1990–91, the fiscal deficit of the centre was 7.85% of the GDP, and the revenue deficit was 3.26%. The net foreign exchange reserves available to government was USD 219 million, just enough to cover about 20 days of essential imports (this was to rise to USD 15700 million by 1995–96).

At that time, that is, at the close of 1990–91, the fiscal deficit of the centre was 7.85% of the GDP, and the revenue deficit was 3.26%. The net foreign exchange reserves available to government was USD 219 million, just enough to cover about 20 days of essential imports (this was to rise to USD 15700 million by 1995–96). It was an uphill task, but Narasimha Rao was nothing if not a thoughtful person; sometimes he thought too much and said too little, and did even less. As he once said—possibly tongue-in-cheek—a nondecision was a decision; inaction was a form of action. But he had a certain dignity, a standing in the Congress party as a former Chief Minister of Andhra Pradesh, a sense of self-esteem as a scholar and linguist. Possibly he also sensed that the people of India wanted a change. Possibly he had read the books and articles by well-known economists that had begun to appear since the early 1970s questioning the pattern of planned development under a regime of controls that had been the hallmark in India. Possibly he had also read the World Bank Development Reports of 1978 and 1980 on aspects of poverty, equity and growth. As a former Foreign Minister of the country, he had been around and had seen some of the changes, and the rapid development that neighbouring countries like Thailand, Malaysia and Indonesia had been able to achieve in terms of economic growth and well-being. Reports of change and development in China were also filtering through. Possibly he had no other choice. He had also worked with Mrs. Indira Gandhi and had known her concerns, and with Rajiv Gandhi and had witnessed the changes that the latter was trying to bring about in the body politic and economic of the country. Narasimha Rao was also a bit of a computer buff.

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The first task of the government was to recover from the economic and psychological shock of the pledging of the country’s gold reserves with the International Monetary Fund in 1990 by the previous government, to tide over the huge balance of payments crisis. This had led to the point that India would have had to default on repayment of earlier debts and interest, in breach of its international obligations. In his Budget of July 1991, Dr. Manmohan Singh struck out with significant personal and corporate tax benefits to generate an overall sense of relief and well-being and, at the same time, reduced and to an extent rationalized the customs and excise duties, besides extending the MODVAT scheme to more items, including capital goods. Another innovative measure was allowing of indexing for inflation of any capital gains that may come into the hands of a person on disposal of land, building, or shares, and so on. This considerably helped the sentiment for long-term investment holding. Then, on 24 July 1991, a statement was made in Parliament by the government making sweeping changes in the industrial licensing policy that had held sway for more than three decades, and effectively doing away with the licensing provisions altogether. It was a wonderfully nuanced document, duly genuflecting to the vision of Nehru to see a resurgent and industrially vibrant India, to Mrs. Indira Gandhi and the Twenty Point programme undertaken by her government to bring about economic growth with a social content, and to the vision of Rajiv Gandhi to take India to the world stage. In between, it practically did away with the entire industrial licensing system that had marked the progress—or the lack of it—on the industrial front since 1955. Somehow, the nation, and the Congress Party, perturbed and concerned as they were with the political trauma of pledging of the nation’s gold stocks and the balance of payments crisis, went along, clutching at any straws—be it the overturning of the industrial licensing regime, or of the import controls. A conscious decision was also taken to divest a part of the stock-holding of the Government of India in some of the public sector undertakings. Prasad was somewhat taken aback by this proposal as the public sector had acquired a certain sanctity in the public mind, and it was almost anathema that this should be brought into question. But the facts were

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there for all to see: by 1989–90, 60 of the public sector undertakings had run up accumulated losses of about Rs. 32,000 crore (about 1.7 times their fixed assets). Public funds had therefore to be constantly infused into these establishments to keep them going—for better or for worse—and that meant a degree of haemorrhaging of public money. But the facts were there for all to see: by 1989–90, 60 of the public sector undertakings had run up accumulated losses of about Rs. 32,000 crore (about 1.7 times their fixed assets). Public funds had therefore to be constantly infused into these establishments to keep them going—for better or for worse—and that meant a degree of haemorrhaging of public money.

In 1992 the government constituted the National Renewal Fund to compensate workers who might lose their jobs in the restructuring process, as also to re-train them for new employment opportunities, besides rehabilitating areas affected by the closure of such units. But, as subsequent events showed up, both the spirit and the flesh were weak, and the NRF went in limbo. Narasimha Rao also brought in the 73rd Constitutional Amendment in 1993 ushering in nation-wide the ‘panchayati raj’ system so dear to Mahatma Gandhi (and later strongly supported by Rajiv Gandhi), and indeed the entire political spectrum, as a means to decentralise economic development. Henceforth, there would be direct elections to the villagelevel panchayats with reservation for scheduled castes and tribes, and women, and to the higher tiers of the gram sabhas and district boards. Increasingly, there would be devolution of funds by both the central and the state governments to these village-level bodies and, for better or for worse, they would have to deliver on the local infrastructure of roads, agricultural extension, irrigation and all that at the grass-roots level. This was to become a defining institutional change—warts and all—in the country’s economic development paradigm. The government also took a decision in 1993 partly to float the rate of exchange and the rate for current account transactions was allowed to float freely.

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At the same time, efforts were made to broaden the revenue base of government by introducing in 1994, for the first time, a specific tax provision for services. Just as the central excise duty was levied on manufacture, a service tax came into being on all sorts of services provided within the economy, from construction and consulting engineering, to catering and provision of mandap for marriages and other social functions. As Prasad could make out, with services constituting a growing proportion of the gross domestic produce, the service tax would generate more revenue for government from a growing sector and thereby serve to moderate, or even reduce, its dependence on central excise as a major source of revenue. The government also introduced a provision for Tax Deduction at Source (TDS), by which banks and companies respectively distributing interest on deposits, and dividend on shares held, were required to deduct income tax and deposit it with government. This served the purpose of augmenting revenues to an extent. But, more importantly, as Prasad surmised, TDS gave a lead to the government about the quantum of income of individuals that was not being properly disclosed. The capital gains, whether on landed property or on shares, on which a tax had been in force for several years, was now allowed to be indexed with the inflation, so that the intrinsic gain—rather than the element of inflation—was taxed. It provided some relief. Overall, as Prasad could see, the trend of the Long Term Fiscal Policy of 1985 was being followed through with rationalisation and reduction of taxes, and broadening of the tax base, with a clear option being given to the taxpayers to comply with tax provisions without constantly having to grumble about it. That was not all. The Commerce Minister, Mr. P. Chidambaram, quickly led off with dismantling of the import licensing controls. For all practical purposes, except a few ‘sensitive’ or restricted items, the rest of inputs and most of plant and machinery were placed under the ‘Open General Licence’ allowing literally any one to import anything freely by paying the customs duty applicable. The government took a policy decision that exports would not be subject to any duties. As it was put, ‘domestic duties on goods are not for export’. Thus, customs duty, excise

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duty and sales tax were allowed by government to be rebated for exports. Under an Advance Licensing Scheme, any manufacturer could import free of duty any inputs required in the production of exportable goods, duly provided with specified Standard Input-Output Norms. Last, but not the least, was the Duty Exemption Pass Book Scheme under which the exporter could straightaway get credit for customs duty payable at the time of import of the necessary inputs, thus easing working capital requirements for export production to that extent. Duty-free import of plant and machinery was allowed against certain export obligations to be borne by the manufacturer concerned, thus allowing for lower capital costs for enhanced levels of production. The rates applicable for pre-shipment credit for exporters, to enable them to procure raw materials and other inputs, and process and package them, was reduced from 12% to 9%, a cost that the government felt the economy would have to bear to enable Indian industries to emerge in the world market, and help to improve the balance of payments position on a sustained basis. Another interesting initiative was the policy for progressive computerisation of certain government functions such as for import and export trade documentation, and payment of customs duty, which so often caused delays and harassment to the industry and trade. As a spin-off of this initiative, the business of computer software firms, some of whom were later to gain international fame, such as Tata Consultancy Services, Infosys and Wipro and several others, vastly expanded, as did that of some of the hardware companies such as HCL, Patni and Zenith, and of computer and software training establishments like NIIT. This gathered further momentum, as by 1997–98, many western countries sought software assistance to handle the famous Y2K problem expected at the turn of 2000, when the existing software programmes would not be able to preserve or recall their data. This marked the beginning of an astonishing growth of India’s services sector, be it software, banking, insurance or air services, and what have you. As Prasad was to learn later from the book Journeys through Babudom and Netaland written by Mr. T.S.R. Subramanian, a former Cabinet Secretary to the Government of India, Narasimha Rao adopted a

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matter-of-fact, no-nonsense approach, and even in Cabinet meetings where major issues on industrial policies were to be decided, he presumed that the ministers had read the cabinet notes and laconically asked in case any one had any points to make. When no points were forthcoming, the cabinet proceeded to adopt the proposed policy changes. In his own taciturn way, Narasimha Rao provided the much-needed political support to his Finance Minister and Commerce Minister to bring about far-reaching changes in the economic policies for the future development of the country. This period coincided with the 1994 Marrakech Agreement under the World Trade Organization considerably liberalising the terms of international trade. Unfortunately however, as Prasad recalled, India was not able to develop an alliance with other developing countries such as Brazil, Malaysia and others, and the negotiators from the Ministry of Commerce seemed too full of themselves and over-confident, and consequently took an unsustainable hard line in the negotiations. In the process, India was not able to see through the labyrinth of Blue Boxes and Amber Boxes, and the fine print of the Agreement that several of the developed countries had created as a sort of ‘smoke-screen’ on the path for Indian products to gain real access to the vast and growing developed markets. Of course, it was better than nothing and, for once, there was a rule-based framework for international trade. It was now up to the Indian manufacturers to make the best of it.

This period coincided with the 1994 Marrakech Agreement under the World Trade Organization considerably liberalising the terms of international trade. Unfortunately however, as Prasad recalled, India was not able to develop an alliance with other developing countries such as Brazil, Malaysia and others, and the negotiators from the Ministry of Commerce seemed too full of themselves and over-confident, and consequently took an unsustainable hard line in the negotiations. In the process, India was not able to see through the labyrinth of Blue Boxes and Amber Boxes, and the fine print of the Agreement that several of the developed countries had created as a sort of ‘smoke-screen’ on the path for Indian products to gain real access to the vast and growing

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developed markets. Of course, it was better than nothing and, for once, there was a rule-based framework for international trade. It was now up to the Indian manufacturers to make the best of it. Possibly for the first time in a public, and in an explicit fashion, the government—while it tackled the serious fiscal crisis, with expenditure far outstripping revenues, and with an unconscionable debt burden— asked the Reserve Bank of India to target inflation as ‘public enemy number one’. The inflation rate, which had been around 14% in 1990– 91, and had dropped close to about 10% for a couple of years, had again risen to about 13%. The first step that the RBI took was to raise the bar for the ‘cash reserve ratio’ (from 11% to 15%) and the statutory liquidity ratio (from 37.5 to 38.5) that directly affects the quantum of liquid lendable funds in the hands of the banks. At the same time, the Reserve Bank’s bank rate, that is the rate at which it would lend to commercial banks, was increased from about 9 to 10% in 1990–91, was jacked up to 12% by mid-1992, and stayed there till 1997. Consequently, prime lending rate of most banks, i.e., the rate at which money is lent to the most credit-worthy borrowers, which was already high at about around 14% by then, further increased to 15.5% by December 1992, and then stabilised at 16.5%. Thus, monetary policy was being used along with fiscal and other policies with a distinct slant for contraction of any excess liquidity from the system and to create an environment for focused industrial growth. As Prasad himself realised while finalising a housing loan for himself to buy at flat—at long last—the interest rate of 13.5% on the mortgage (to be cleared in ten years) was pretty steep and quite taxed his monthly income. As he could see all around, this process of re-adjustment was a painful one as industries groaned under the burden of the interest they had to pay the banks on both working capital and long-term loans. The debt-equity ratio, that is, the proportion of long-term loans from banks or fixed-rate debentures floated by companies to raise funds in relation to the equity capital raised from the share-holding public, was at times unconscionably high at 3:1. This was because of the simple calculation of many, if not most industries then, that in a regime where

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what they could produce, how much they could produce, and at what price they could sell the produce, was determined by government, it was prudent also to take money from government-owned banks rather than pitching in with one’s own funds. Of course this line of thinking, as well as government’s earlier policy for provision of loans at preferential rates to certain sections of industry, had led to considerable build-up of bad loans with the banks on which neither the interest nor the principal was being received by them. Added to this was the coming into public view in early 1994 of a major share scam in which bank funds had been extensively used by certain unscrupulous market operators in collaboration with some equally unscrupulous bank officers to push up share prices in an artificial manner. The Reserve Bank had stepped in with some strong measures to check this sort of thing. All these policies led to a significant compression of the market in terms of price realizations while the cost of many inputs, particularly of power and fuel, was rising. Profits were under serious pressure which compelled the industries to have a fresh look at their business policies, mode of financing, and so on. But, for the first time they were uncluttered with any restriction under the licensing policy about what they could produce, how much of it, and at what price. In fact, the price control of steel, which had been in force since practically World War II, was done away with, just as prices of cement, sugar, wheat, etc., had been de-controlled earlier. In the meantime, Prasad had been asked by the management to deal with the cash flow of the Chamber and the administrative chores of negotiating with the unions on annual bonus, Dearness Allowance neutralisation, and the ‘domestic enquiries’ every now and then, in addition to the responsibilities of his specific secretarial duties. This, he felt, was getting a bit too much. He seemed to be getting increasingly hemmed in with ‘domestic enquiries’, at times resulting in some degree of punishment of the staff concerned and apparent encouragement to the affected staff member and the unions that was emanating from certain quarters. It was time to move on while the going was good, before any serious conflict situation arose. It was a bit of a break leaving a job he had faithfully rendered for more than 24 years. But that was part of the

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growing-up process, and he was happy to be now engaged fulltime in dealing with the work of steel plant accessories. It was now being increasingly felt in official circles that the return on the capital employed (taken from the public at large) was so poor in most of these units for a variety of reasons (not the least of these being the far-reaching bureaucratic control on their decisionmaking processes), that any measures that would yield higher returns to the government would be vastly preferable. It was thought that divesting a part of the public investment to the employees, or in the share market, or to any strategic partner or investor, would help it realise substantial amounts of funds that, in turn, could either be used to retire part of the growing public debt or fund some specific social programmes like employment generation schemes, primary schooling, public health, and so on.

Government was also by this time thinking of ‘re-structuring’ the public sector units. Over the previous forty years or so, government had invested huge amounts of public money raised by way of taxes in public undertakings, be it in heavy electricals, machine tools, manufacture of films and microscopes, materials trading, pharmaceuticals, steel, aluminium, fertiliser, oil refineries, textiles or even hotels and tourism. It was now being increasingly felt in official circles that the return on the capital employed (taken from the public at large) was so poor in most of these units for a variety of reasons (not the least of these being the far-reaching bureaucratic control on their decision-making processes), that any measures that would yield higher returns to the government would be vastly preferable. It was thought that divesting a part of the public investment to the employees, or in the share market, or to any strategic partner or investor, would help it realise substantial amounts of funds that, in turn, could either be used to retire part of the growing public debt or fund some specific social programmes like employment generation schemes, primary schooling, public health, and so on. Of course it was easier said than done because of in-built resistance to change, and an array of vested interests, ranging from some of the workers unions to unscrupulous management staff and sections of bureaucrats and

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politicians who often used these public sector units as pocket boroughs. It was found in some studies that just allowing the public undertakings to take their own business decisions without any interference by the government would itself add about 0.6% to GDP growth, and a 25% disinvestment of the government-held shares to the public or to any strategic partner would garner a further 0.6% for GDP growth. However, whether this 1.2 percentage points addition to GDP growth (then around 6.5%) would be good or bad for the economy became mired in interminable political debate. The Narasimha Rao government also articulated its concerns about the level of fiscal deficit of the government, with its huge burden of debt repayment and subsidies. The consolidated fiscal deficit (inclusive of transfers to the states according to the recommendations of the Finance Commissions from time to time) had risen from 5.7% of GDP in 1978– 79 to 9.7% by 1984–85, and all-time high of 9.89% in 1986–87, and was hovering around 7 to 8% up to the mid-1990s. Part of the answer to this of course lay in the huge increase in government’s current expenditure, which rose from an average of 11.8% of the GDP between 1960 and 1964 to 23% between 1980 and 1889. Subsidies (such as those on fertiliser, power, and the public distribution system) had also increased from 0.7% of GDP to 3.6% over the same period, and net interest payment by government had gone up from 0.4% of GDP to 2.5%. There were any number of poverty amelioration and income augmentation programmes that successive governments had instituted over the years, such as the Public Distribution System (since the early 1950s) for issue of foodgrains at subsidized prices to keep the price-line in check, the Integrated Child Development Scheme, Integrated Rural Development Programme (in 1984), the Jawahar Rozgar Yojana (since 1989), the Indira Awas Yojana, the Drought-prone Areas Programme, and several others. But the basic fact was that these programmes by the end of the 1980s accounted for only about 8.9% of the central government’s plan expenditure, and 1.45% of GDP. Corroborating Rajiv Gandhi’s surmise about the very low amount of government spending for poverty alleviation programmes actually reaching the poor, subsequent

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studies revealed that government spent about Rs.1.80 to ensure that at least a rupee reached the beneficiaries under the Integrated Child Development Scheme, and Rs. 4.35 to transfer one rupee under the Jawahar Rozgar Yojana. As Prasad was himself beginning to realise, his family, which could be taken as the middle of middle class population, was taking wheat and pulses under the PDS more to keep alive the “ration card” that was required more as proof of residence and identity than because they wanted, or deserved, the subsidized food grains. Besides, there were persistent reports of a large number of bogus or ‘ghost’ ration cards that had been issued by the state governments for one reason or the other. These resulted in unwarranted drain on the PDS. Mindful that the fiscal re-organisation that the country was now faced with would lead to compression of government expenditure in the short run, Narasimha Rao and Dr. Manmohan Singh simultaneously took up some specific poverty alleviation and employment generation programmes, as part of what they called ‘reforms with a human face’.

Mindful that the fiscal re-organisation that the country was now faced with would lead to compression of government expenditure in the short run, Narasimha Rao and Dr. Manmohan Singh simultaneously took up some specific poverty alleviation and employment generation programmes, as part of what they called ‘reforms with a human face’. Or as Narasimha Rao, striving to create a national consensus on reforms and liberaliation, termed it, ‘a middle way’. So, the public distribution system was revamped—now known as Revamped PDS—from 1992, to target the drought-prone, tribal, desert and hilly areas where many poor people lived. The National Renewal Fund to take care of people affected by re-structuring—including the closing down—of loss-making public sector undertakings, and for their re-training had already been set in motion. The Jawahar Rozgar Yojana was made into the Intensified JRY to target employment generation in 120 most backward districts of the country. Again, in 1994, an Employment Assurance Scheme was set in motion in more than 2000 backward blocks. But still, the demand

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grew for more and more ‘hand-outs’. As Prasad mulled over a paraphrasing of Mark Twain: “It is so easy to give up on hand-outs. I have given it up so many times”. The central point seemed to have been missed altogether. With about 33% of the population below the poverty line (as defined then) of a consumption level of only Rs. 49 (at 1973– 74 prices) per person per month, the gravity of the continuing poverty level was far, far more acute and urgent than the unemployment problem of 20% of the population. The process of contraction triggered by the fiscal and monetary policies drove the industries in two basic directions: reduction of the interest burden and a cut-back on overheads, and a direct attack on all inefficiencies, be it energy or material usage. For nearly 40 years the industries had functioned in practically a protected market, behind a barrier of licences and controls, with little or no concern about cost control. In the absence of a wider, functional market mechanism, prices were almost always determined on a ‘cost-plus’ basis; that is, the costs were taken as largely given, and the profit margin being just added on. In the process, the consumer and the public at large had got the rough end of the stick, and had to contend with price hikes, indifferent quality, and uncertain availability. Now, the boot was on the other foot. The consumer was gaining all around as prices fell with lifting of licensing controls, lowering of duties, growth of production, competition from overseas and improved quality of goods. The prices of colour TV sets, refrigerators, computers, cars, and other consumer durables fell appreciably because of cost reductions and also of growing volumes as more people could afford them now. Possibly for the first time in the economic history of the country, manufacturers started talking about ‘customer satisfaction’. Part of this was of course pious words, but part of it was hard business sense. Most of all, the growth of GDP, which had more or less stagnated at an average of 4.2% between 1955 and 1990, showed a marked upturn to 6% by 1993–94, to 7% in 1994–95, and to about 6.6 % in 1995–96. This was effectively a more than 50% rise in the rate of growth, and people felt by and large good about it. Importantly, also, as Prasad could see all around, the state governments, realising that they had some major fiscal problems on hand, and that they could not

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depend on central handouts for ever, started taking more and more local initiatives to push for growth. Foreign direct investment by major overseas corporations were being earnestly solicited, as was investment by nonresident Indians. The liberalisation in industrial policy that had been put in motion since July 1991 provided enough opportunities for manufacturing, processing, software and other industries to come up, and many of them flocked to the southern states of Andhra Pradesh, Karnataka and Tamil Nadu as well as to the western states of Maharashtra and Gujarat where they found receptive and supportive governments. New names appeared in advertisements of durable consumer products in newspapers and magazines: Hyundai, LG, Samsung, Whirlpool, Sanyo, Nokia, Sony Ericsson, Honda, Sony, Toyota, and others. New features, new options—often at a lower price—were now available to the Indian consumer so long used to scraping and scrounging. Entrepreneurs and investors started thinking big. Possibly the first off the block was Reliance Industries with its mammoth crude refining and petrochemicals complex in Gujarat of more than 20 million tonnes. Others were not slow in following up. Maruti Udyog was expanding its car production facilities; Tata Motors was coming out with a new plant for a new car; Mahindras were also expanding. Hero Honda and Bajaj Motors were substantially expanding their production facilities for scooters and motor bikes. TVS had also come out with its products. Other domestic brands like Godrej, Voltas, Blue Star and others made names for themselves. Well-known pharmaceutical companies like Ranbaxy, Dr. Reddy’s, Piramals, expanded rapidly, as did the hospitals services sector. There was substantial expansion in cement and steel industries, and the National Thermal Power Corporation started setting up new power plants or expanding existing ones. The race for development was truly on. New names appeared in advertisements of durable consumer products in newspapers and magazines: Hyundai, LG, Samsung, Whirlpool, Sanyo, Nokia, Sony Ericsson, Honda, Sony, Toyota, and others. New features, new options—often at a lower price—were now available to the Indian consumer so long used to scraping and scrounging.

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But of course not even the clever Mr. Narasimha Rao could do much about the rumours floated in political circles about his having taken a suitcase—yes, some reports even gave the dimensions of the suitcase— of cash from some unscrupulous trader or business man. It did not help that he had managed to persuade some politicians to back his government in a crucial vote—for a consideration, it was alleged with feigned horror, of all things! Strong exception was taken—as it often happens, in hindsight—that Rao had taken a less than pro-active role in the highly charged atmosphere at the time of the demolition of the Babri Masjid in December 1992. India, which has a rich tradition of oral history and literature, found it easy to go by hearsay rather than through facts collected by inquiry and investigation. They took too much time in any case. Under the garb of targeting these faults, some sections of politicians were in fact targeting the economic policies of his government that had at long last shaken off the shackles of the past, such that the economy was now poised for 7 to 8% annual growth. But that was not to be. Rao lost the elections in 1996. For the next couple of years or so three governments came and went their own way. Well, not quite.

Chapter

9

The Unkindest Cut

Indian industries, driven by the liberalisation of economic policies since 1991, had at long last woken up to the realities of the market place. Costs had to be brought down, for demand and supply would henceforth largely determine the price at which most commodities or services could be sold in the market. On the other hand, the cost of manufacture or servicing to an extent could be autonomously determined by the respective managements through higher productivity and internal efficiency. By 1997–98, downsizing or rightsizing the staff strength was no longer taboo for discussion. Voluntary, and not so voluntary, retirement schemes were being taken up, whether it was the banking sector, the steel industry, cement sector or any other. Some gained, some lost in the process. An unskilled worker in a steel plant, engaged in unloading of coal, was paid voluntary retirement benefits of around Rs. 5 lakh, and if he or she was a little thoughtful, a small house and a plot of land could be purchased with the money near any of the industrial townships, and a small business of supply or transportation started up. In the public sector banks, the severance compensation was higher (up to a maximum of 60 months of the last drawn salary), and a senior clerk getting around Rs. 16000 or Rs.18000 could well expect about

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Rs. 9 to 10 lakh, besides whatever he or she received by way of provident fund accumulation, gratuity, and the personal savings over 25 or 30 years. In some cases, such as in the State Bank of India and the Reserve Bank of India, there was the additional benefit of pension subject to a minimum number of years of service, with provision for commutation of pension up to 30–35% (so that one could get this money in bulk), with a further proviso that the commuted amount would be restored if the pensioner lived for more than 15 years beyond the point of retirement. The pension was also indexed for inflation. Many sat back and enjoyed all this. But then, many of them had been enjoying that one way or the other even in the course of their careers of over 20 or 25 years. In some cases, such as in the State Bank of India and the Reserve Bank of India, there was the additional benefit of pension subject to a minimum number of years of service, with provision for commutation of pension up to 30/35% (so that one could get this money in bulk), with a further proviso that the commuted amount would be restored if the pensioner lived for more than 15 years beyond the point of retirement. The pension was also indexed for inflation. Many sat back and enjoyed all this. But then, many of them had been enjoying that one way or the other even in the course of their careers of over 20 or 25 years.

Elsewhere, in the private sector, business processes were being radically re-cast, whether through the simple expedient of computerisation of operations or through outsourcing of certain non-critical operations, or divesting or shutting down of business activities not in keeping with core business interests. Increasingly, internationally famous business and financial consultancy firms such McKinsey and Co., Arthur Andersen, KPMG, PriceWaterhouseCoopers, Ernst & Young, Merrill Lynch, Booz Allen and others were being retained to help formulate new business strategies and financial plans. So many new things were happening; so many new thoughts, new initiatives. The country had seen two quick changes of government following the defeat of the Narasimha Rao government in 1996. Mr. H. Deve

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Gowda, former Chief Minister of Karnataka, became Prime Minister in a coalition government—no single party having won a majority. But before he could take any major initiatives, his government also lost its majority, and Mr. Inder Kumar Gujral followed him as Prime Minister in quick succession. Mr. Gujral had been earlier a minister in Mrs. Indira Gandhi’s cabinet, and was a former Ambassador of India in Soviet Russia. He formulated some new policies towards India’s neighbours and did not seek to make any major changes in the policies then in force. However, as some commentators put it, the poor did not generally have the time to look around as to who enjoyed greater income and wealth than themselves. They knew and accepted this as a fact of life and tried within their means and ability to do better, rather than spending time to moan and groan about it. They had to live for the day and somehow make ends meet with the meagre 30 or 40 rupees the family could put together for the day. The political sections had the time and the onus to focus attention on their lot. It sufficed for the poor that their lot was changing and their incomes were growing, albeit slowly. Growth, if nothing else, provided hope.

The abject poverty that had stared India in the face since the early 1950s had started showing signs of a decline since the mid-1980s and more so since the economic reforms of 1991 and thereafter. At least some of the surveys on the number of people below the poverty line, that is, a consumption rate per capita per day of about Rs. 20, seemed to suggest this. It was reported in some places that inequalities in income and wealth had increased with the growth of the national economy. However, as some commentators put it, the poor did not generally have the time to look around as to who enjoyed greater income and wealth than themselves. They knew and accepted this as a fact of life and tried within their means and ability to do better, rather than spending time to moan and groan about it. They had to live for the day and somehow make ends meet with the meagre 30 or 40 rupees the family could put together for the day. The political sections had the time and the onus to focus attention on their lot. It sufficed for the poor that their lot was

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changing and their incomes were growing, albeit slowly. Growth, if nothing else, provided hope. Prasad, in the course of his work in Calcutta, and while traveling about, could see some signs of it. Bimala, who worked as a part-time maid in his household, was earning Rs. 600 per month with a major meal in the afternoon besides tea and snacks, while her husband—a mason— was earning about Rs. 120 per day for at least 20 days in a month, while her son was working as a peon in an office for a salary of Rs.1500 per month. So, somehow the family was making do with about Rs. 4500 per month. In fact, with a small loan of Rs. 10,000 from Prasad’s mother, Bimala was able to change the thatched roof of their room in a suburb of Kolkata into a hardier, tiled roof. In the meantime, with the help of another loan, she was able to marry off her daughter. It was similar with Dhiren, who worked with one of Prasad’s neighbours as a cook with a salary of Rs. 800 per month, besides food, clothing and medicines and a bonus during the Durga Pujas each year. Over the years he and his three sons had been able to increase their paltry landholding in Midnapore from one acre to two acres. There was a cost involved no doubt, as seeds, fertiliser, pesticides, etc., cost money. But with the help of his three sons, and with paid leave in July (for planting the rice), and in December (for the harvesting), Dhiren had been able to start off the first two sons in a small business of furniture-making and house-building, while the third had come to Calcutta and was working in an office as a peon. Still, it was hard going, and most importantly, neither Bimala nor Dhiren and their family could lay aside much, or anything at all, for the future when they would be too old to work, or to provide for any major illness. Sakina had a harder lot, for she and her husband did not have any land. With their meagre capital, each of them bought vegetables from the interior areas of Sonarpur, Boral or Baruipur and sold them in the retail in the Gangulibagan and Bansdroni markets in Kolkata, each with a basket of just Rs. 200 or Rs. 250 worth of goods out of which they could each take home in a day about Rs. 25 or Rs. 30 only. And it was hard work, rain or shine, and no income if one fell ill. Ramesh also did

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not have an easy time; for he operated a cycle-rickshaw in Santiniketan. He had taken the cycle-rickshaw on hire from a trader and had each day to pay Rs. 12 for the hire. He ran it—rain or shine, each day of the week, of the month, and the year—to earn the Rs. 40 or Rs. 45 each day, net of his meals at least. But he had to pay a rent of Rs. 150 for a room, and also wanted to educate his children, which cost him another Rs. 200 or so per month. So, it was really touch and go. Bannari, whom Prasad had met while visiting Betla in Palamau National Park in Jharkhand, also had a hard time for her family too did not have any land. Her husband had to be away during the sowing and harvesting season either near Japla, also in Palamau, or farther away in Hazaribagh district to help some landholder or the other with daily labour, for which he got the royal amount of Rs. 40 per day, besides some food. It was her lot to keep the house and look after the children, and the couple of goats and pigs that they had as assets. When the goat or the pig had young, and had fattened up, she would sell them to the neighbours or in the local haat, or bazaar. Sometimes she had a couple of sweet gourds or bitter gourds (which grew on the roof of her thatched hut) to spare to sell in the bazaar. In addition, she had to go out early in the morning to collect— in season—the mahua flower, unripe mangoes or tamarind fruit and sell them in the market. At times she would, with her deft fingers, make leaf-plates with the bauhinia or sal leaves from the forest and sell them also, for the sum of Rs. 7 per 100. Bannari knew it was tough, but she was up to it, and she never lost her smile, or a sense of hope that it would be better tomorrow. But it seemed to Prasad that this striving, this optimism, this hope, had come practically crashing down one day in January 1998 when the government of Mr. I.K. Gujral adopted the Fifth Pay Commission Report for government employees. The Commission, under Mr. Justice Pandian, and two other members drawn from the administration, and one economist, who apparently gave a note of dissent, had not called for (as far as Prasad could recall) any submissions from the public who would have to bear the burden of it at the end of the day. At the stroke of a pen—not an ordinary pen, but that of the Union Cabinet—the salary

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of government employees at the minimum level was revised from about Rs. 1200 (basic pay) to Rs. 4200 per month, and at a more senior level of an officer, it increased from Rs. 7500 per month (basic) to about Rs. 14000. Added to this was the Dearness Allowance at about 50 or 60% of basic salary and other allowances, besides a spin-off towards pension. This came at a time when the secretariat level officers in the central government (deputy secretaries, directors, joint secretaries, additional secretaries and full secretaries to the government) numbered 1371, out of a total staff strength of 38.9 lakh. Later, by 2001, as Prasad subsequently learnt, this rose to about 1690 out of 38.6 lakh staff. To be sure, the ‘teeth-to-tail’ ratio, that is, the number of decision-making executive officers was minuscule relative to huge numbers of support staff (socalled) such as sweepers, malis, peons, tea boys, drivers, electricians, telephone operators, typists, stenographers, filing clerks, etc. This had been in the offing for some time, as the government debated the pros and cons of the revision of salary and terms of the employees. Prasad had known since childhood that government employees had not been paid salaries equivalent to that prevailing in private employment. His father had, after all, been a government officer. But there was security of tenure, a certain dignity attached to the office, and the post-retirement pension always to look forward to. The family had not really been in want. But it now seemed that these considerations were either not taken into account, or were set aside. Appointments in government usually came by way of ‘posting’ instructions, and not by any agreement or contract that marks any private sector appointment. Parity was the new slogan: equal pay for equal work. Prasad, and many others like him who worked in private sector organisations, who year in and year out had unfailingly reported for duty by 9.30 a.m. and had left only at 6 p.m. after completing the day’s work—often working much beyond this if the work load so demanded, were quite non-plussed by the turn of events. In different government offices in the state, and at the centre—more so in the state—many, if not most, staff were conspicuous by their absence till about 10.30 or 11 a.m., and many often left by 4 o’clock or so, pleading urgent purchase of school books for the children, or to see the dentist,

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or to attend some social event or the other. If the actual hours of work were less, the pace of work during the day often left much to be desired. It usually sufficed for a typist in government to make out two or three letters in a day, while Prasad’s own steno-typist almost as a matter of rule had to contend with four or five letters plus perhaps another three or four pages of notes or reports each day. In the course of visits to government offices, it was commonplace to see good numbers of peons, typists, filing clerks and other staff lounging about, sipping tea and gossiping. After the induction of computers in some government offices, the playing of games on the PC held out an added attraction when there was no work in hand; and that happened quite frequently. Inquiries for a particular officer often yielded the reply that he or she would be late in coming, as they had to reach their daughter’s family to the railway station, or had an appointment with the doctor, or was just not feeling up to it. “Please come back in the second half ”, was the usual bland reply. Obviously, any compensation, whether in the public or the private sector, should reflect the level of physical and intellectual input given in a working day, the span of responsibilities, decision-making needs and implications, and impact of such decisions on the organization (explicitly), and on the larger society (in an implicit sense). Of course the paying capacity of an organisation had to be a major consideration But then, technically, government had almost infinite paying capacity because of its powers to tax the citizens in infinite ways.

In the early 1980s, from whatever Prasad remembered from press reports of the day, a secretary to the government of India or the chief secretary to a state government (the highest civilian administrative posts) carried basic pay packets of about Rs. 7800 to Rs. 8000 per month, added to which was the dearness allowance of about Rs. 4800 to Rs. 5000. Added to this were some other allowances and the package would have then come to about Rs. 20,000 to Rs. 25,000 or so. This was much lower compared to Rs. 50,000 to Rs. 60000 per month that a director or chief executive of a middle-sized private sector would have then been getting. Obviously, any compensation, whether in the public

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or the private sector, should reflect the level of physical and intellectual input given in a working day, the span of responsibilities, decisionmaking needs and implications, and impact of such decisions on the organisation (explicitly), and on the larger society (in an implicit sense). Of course the paying capacity of an organisation had to be a major consideration But then, technically, government had almost infinite paying capacity because of its powers to tax the citizens in infinite ways. It was no doubt true that the compensation in the private sector had risen since the liberalization of the economy since 1991 with the increase in the responsibilities (under conditions of fairly stiff competition) of the business and of profits—the touchstone of private enterprise. If one delivered the results, well and good. Otherwise one had to look for another job. Somehow, this calling to account of an officer or an executive in government or the public sector was rare owing to the size and diffuse nature of the administration, with everyone pointing to one rule or the other, and the inherent provisions for ‘flexibility’ and consequent possibilities of ‘passing the buck’. It was usually the ‘rule’ that was in the dock, and not the officer concerned. Whether the insecurity of employment in private industry ought to have a discount element for the salary and other terms, and conversely, the security of tenure in a government job a premium, had often bothered Prasad. Moreover, the perquisites of office in private industry—at least in the limited liability companies with a reasonably wide share holding— were quite specific; such as Rs. 15000 per month for house rent, membership of two clubs, car with driver with petrol and maintenance paid, and so on. These were usually the subject matter of the agenda and of formal resolutions at the annual general meetings of companies. There was just no corresponding procedure for public announcement about the salary and terms of government employees. The government flats on Ironside Road or Gariahat Road (South) in Calcutta, or the bungalows of senior officers on the Pandara Road in Delhi that Prasad had often passed by were apparently then charged nominally at about Rs. 1000–1500 per month as rent, but included at least another Rs. 20,000 as a sort of indirect subsidy compared to the market rent for

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a similar-sized and similarly located flat. Officers of the rank of a deputy secretary (and above) in the government were provided with a car and driver and charged a nominal Rs. 150 per month plus Rs. 1 per kilometer (when the cost of taxi hire was Rs. 4 per kilometer) if used for personal purposes. There was provision also for the scholarly amongst the administrators to get 28 months, that is 840 days, fully paid study leave in the course of their career; but of course they had to produce a diploma or degree at the end of it. If that was not enough, scope was provided for a maximum of five years of leave without pay for any personal contingencies, without severance of service. Some of the public sector undertakings had the advantage of medical benefits without any ceiling, and for life-time. Some, such as the major nationalised banks and the Reserve Bank of India, had provision for carry over of casual leave (15 days in a year) and accumulation up to 18 months of sick leave (with half pay), or a little more or less, besides loans for car purchase or house-building at concessional rates of six to seven percent, when the rest of the country was required to pay around ten to eleven percent as interest on such loans. Pension was also granted. Such terms were quite unthinkable in most sections of the private industry. Apparently these aspects were not factored in either by the Fifth Pay Commission or by the government. According to a World Bank study following the adoption of the Pay Commission Report, government employment in India accounted for about 1.4% of the population, but the average salary of a government employee was 7 times the average per capita GDP in the country as a whole, compared to 1.4 % in Pakistan and at only two times the per capita GDP. In Thailand this translated to 2.8% of population, and four times per capita GDP, while in China it was 2.7% of population and 1.5 times per capita GDP. The search in India for egalitarianism, Prasad thought, had to go much beyond private property and enterprise. Around this time, Prasad came across the famous or infamous Fundamental Rules and Supplementary Rules concerning government service, and the parallel Central Civil Service (Conduct) Rules. There were, as far as he could see, several subsidiary rules such as the ‘traveling

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allowance rules’, the ‘house rent allowance’ and ‘city compensatory allowance rules’, ‘staff car rules’, ‘leave travel concession rules’, ‘house building advance rules’, ‘overtime allowance rules’, ‘pension rules’ and last but not the least, the ‘list of medicines (admissible and inadmissible)’. A glance through it threw up additional gems of knowledge such as ‘special pay’ for an upper division clerk, if he or she should also work as a cashier, besides a ‘stagnation increment’ (apparently introduced in 1970 and revised in 1987), something that was quite unheard of in private industry, and was therefore beyond Prasad’s level of knowledge and understanding. Besides, there was special daily honorarium for stenographers for taking verbatim proceedings of legislatures and government committees, and honoraria for sundry other types of work. There were, as far as he could see, several subsidiary rules such as the ‘traveling allowance rules’, the ‘house rent allowance’ and ‘city compensatory allowance rules’, ‘staff car rules’, ‘leave travel concession rules’, ‘house building advance rules’, ‘overtime allowance rules’, ‘pension rules’ and last but not the least, the ‘list of medicines (admissible and inadmissible)’. A glance through it threw up additional gems of knowledge such as ‘special pay’ for an upper division clerk, if he or she should also work as a cashier, besides a ‘stagnation increment’ (apparently introduced in 1970 and revised in 1987), something that was quite unheard of in private industry, and was therefore beyond Prasad’s level of knowledge and understanding.

The Civil Services Conduct Rules (CSCR) were no less interesting. They straightaway defined the family of a government servant as wife or husband, son or daughter, step-son or step-daughter wholly dependent on the officer concerned, or any person related by blood or marriage, and enjoined upon all government officers to maintain absolute integrity (absolute—mind you—not relative), maintain devotion to duty, do nothing that is unbecoming of a government servant, and ‘shall in performance of his duties act according to his best judgement’, except—interestingly— ‘when he is acting under the direction of his official superior’. Moreover, a government servant who habitually failed to perform the task within

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the time set for the purpose ‘shall be deemed to be lacking in devotion to duty’, and obviously no officer in the performance of his official duties could act in a discourteous manner. It would be considered misconduct if a government servant acted in a manner prejudicial to the interests of government, and ‘familiarity arising out of private hospitality’ was to be avoided. And so on and so forth for about 100 pages. As Prasad quickly realised, all this was in most cases observed more in the breach; as they say in Bengali, thhag bachhtey gao ujar (or, to separate the rogues from the villagers means none would be spared). But one had to admit the noble sentiment was there all right. The most charming story that Prasad had seen in recent years was related by Mr. Arun Shourie in his book Governance on how some innocuous noting—one in red ink and some in green ink—in a file of the Ministry of Steel in 1999 triggered off a spate of official references (lasting for about a year) to the Department of Administrative Reforms, the Directorate of Printing, then the Department of Personnel and Training, the Director of the National Archives, and even the Ministry of Defence, as to whether, and under what conditions, ink other than blue or black could be used. A jolly good time was had by all. As mentioned by Mr. T.S.R. Subramanian in his book Journeys through Babudom and Netaland, in addition to what had been recommended by the Fifth Pay Commission, some of the central ministers pitched in with their own recommendations for improvements in the terms of their respective charges, such as those in the railways or postal services or the police, and a total of additional twenty-six demands for improvements in salary and terms of government staff was agreed upon. The other recommendations of the Commission report, such as rationalisation of staffing, with abolition of about 3.5 lakh posts lying vacant at the time, reduction in number of posts and staff strength by about 30% over the next few years, improvements in work culture and work practices and, generally, a more flat organisational structure of the government were cast aside and never implemented. In consequence, the salary bill, together with liability for pension of the Government of India increased by Rs. 33,000 crore, or about 36%

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of aggregate government revenue budget, or about 2% of the GDP. A total of about 3.86 million employed by the central government were the immediate beneficiaries. This was followed in quick succession by revision of salaries for the employees of the respective state governments, public sector undertakings, public sector banks and others, accounting for another 12 million or so, resulting in an additional liability for these institutions to the tune of about a further Rs. 50,000 crore. According to a report that Prasad saw shortly after, the number of employees of public sector undertakings had increased from 7 lakh in 1971–72 to 18 lakh by 2000–01, their average emoluments had increased from Rs. 6000 per annum to more than Rs. 2 lakh, that is, an increase of about 3446%, while over the same period (1971–72 to 2000–01) the Consumer Price Index had risen by 1040%. With all this, the rest of the country with its balance of some 800 million was left to fend for itself as best as it could, which, to Prasad’s mind, was not a very decent thing to have been done. Where was the concern for the likes of Bannari, Sakina, Ramesh and the millions like them? The ministers, who are engaged in public service, apparently with an annual cost of Rs. 24 lakh directly (in 2000) and about another Rs. 30 lakh indirectly for each seemed to have forgotten about Sakina and Bannari. But then, decency, concern for others, moderation, etc., often appeared to be at a discount; self-interest and self-promotion as often counted for more. And government seemed unable, or unwilling, to mediate to bridge this division. It was now basically every man for himself, and Sakina, Bannari and Ramesh could go hang.

Chapter

10

Steady On

Although the government changed by mid-1998 and, after a short interregnum, a new government of the National Democratic Alliance under the prime ministership of Shri Atal Bihari Vajpayee took office in 1999, the entire episode of the Pay Commission seemed for quite some time to Prasad to have been a bad dream. Not only for him, but many persons shared their bitterness and bemoaned their fate that they had chosen to work in the private sector rather than take up a job—even as a peon, some said—in government, or one section or the other in the public sector. The dignity of labour—so much talked of during the initial days of planning—had long been given a go by, and the whole episode had been particularly demeaning for sincere and hardworking people. Moreover, the hangover of the implementation of the salary revision portions of the Fifth Pay Commission found its echo in the fiscal deficit of the centre, which rose from 4.88% of GDP in 1996–97 to 6.51% by 1998–99, while that of the state governments rose from 6.38% of GDP to 9% over the same period. This was not something to be winked at, for it clearly indicated that government was living beyond its means. The question had often come to Prasad’s mind as to whether a

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government was not obliged—like any individual or a family—to live within its means. Obviously, a government had its obligations to the country as a whole, in terms of insuring security, enforcing law and order, providing a modicum of healthcare, assisting the people in overcoming floods or drought, dealing with epidemics, providing certain basic infrastructure by way of rail, road, communications, power supply, irrigation facilities, and all that. All this required funds, and that was the rationale, as Prasad saw it, for the taxes and duties, cess and so on that the citizens were expected to pay to the government. There was obviously a cost attached to the provision of such public services, in terms of manpower costs, some basic infrastructure, and expenses incidental to the running and maintenance of this infrastructure. At the same time, in an emergency such as in an appendix operation or a bypass heart surgery, a family may have to take a loan from some relation or the other and, Prasad admitted, the government could (for emergency situations like providing for earthquake or flood relief ) may equally resort to borrowings from the market or from financial institutions by issue of bonds or other debt papers. But there was the question of having to pay the loan back in some way or the other; and certainly in the case of government, with interest. With interest payments alone (leaving aside the principal for the time being) amounting to more than 25% of government revenues, it seemed to Prasad completely at odds with financial prudence for government to have run up a fresh liability (immediately, and for the future) in terms of salary and pensions, etc. with both eyes open. Possibly, Prasad thought, government’s political eye was quite open while the economic eye was closed temporarily. In any case, the issue was serious enough for several state governments in submissions during 1999–2000 to the Eleventh Finance Commission (which dealt with the constitutional devolution of funds from the central government to the states), to have pleaded for prior consultations before any pay commission recommendations were finalized in future, and to provide resources from the centre in the event any further pay revisions were to be implemented. The Eleventh Finance Commission subsequently recommended that constitution of pay commissions on a routine

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basis every 10 years or so may be avoided, and in any case the state governments should be duly consulted. The Commission also suggested that pensions should be re-cast in a manner that they did not become an unsustainable burden on the exchequer. Prasad sometimes wondered if anyone in government or Parliament was actually listening. The NDA government got into its stride quite early and several policy initiatives were taken between 1999 and the next two or three years. The underlying thinking and thrust of these policies, plainly, were concerned with growth. This growth, it was felt, would be generated through investment, and primarily through private enterprise, although it was quite realised, and acted upon, that the state should develop and provide the basic infrastructure of roads, railways, better communications, power, irrigation, etc., that would provide the base for private initiatives in industry and trade. This was to be in turn bolstered by simplification of official documentation and procedures, as several reports (such as the World Bank’s Doing Business 2005) highlighted the fact that it usually took 89 days to start a new business in India relative to 41 days in China, and as low as eight days in Singapore. If starting a business was time-consuming, closing a business due to bankruptcy (due to normal business risks, a bankruptcy was always possible) was equally long-drawn, about 10 years in India compared to 2.4 years in China, and 0.8 years in Singapore. People—and Prasad was also drawn to these issues—started referring to the book, Mystery of Capital, by Hernando de Soto, which highlighted the heavy burden that businesses had to bear due to heavy-handed government regulations, weak property rights, and irksome business entry and exit procedures. Some researchers went to the extent of suggesting that the official regulations and procedures laid down and in force since 1956 to 1986 possibly cost the country about 1.5 to 2% lower GDP growth each year. That, if true, Prasad felt, added up to quite a bit. Before the end of the 1990s the inter-country and inter-state differences in economic and social development were showing up. In their book, India: Economic Development and Social Opportunity by Jean Dreze and Prof. Amartya Sen, (published in 1996, but which Prasad

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got hold of only in 2000), it was mentioned that average annual growth of per capita GNP for the period 1980 to 1992 was 3.1% in India, compared to 7.6% in China, 8.5% in South Korea and 6% in Thailand. Infant mortality rate (per 1000 live births) as an index of primary health care was 79 in 1992 in India as compared to 31 in China, 18 in Sri Lanka and 26 in Thailand. Adult literacy in 1992 was 52% in India relative to 78% in China, 89% in Sri Lanka and 94% in Thailand. The book further reported that in 1991–92, (that is, as Prasad saw it, after about 36 years of planned—and, to an extent, unplanned—development in the country) the per capita state domestic product at current prices was on average Rs. 5583 on an all-India basis, while that in Punjab was Rs. 9643, in Andhra Rs. 5570, in Gujarat Rs. 6425, in Maharashtra Rs. 8180, and in West Bengal Rs. 5383. The social indices mentioned in the book also showed up considerable variations between the states, with infant mortality at birth in 1991–92, out of every 1000 live births, being a low of 17 in Kerala, and a high of 120 in Orissa, with 66 in West Bengal, 58 in Tamil Nadu and 57 in Punjab. Both Yashwant Sinha who piloted the finances of the country for the first couple of years of the NDA regime, despite being derided in some quarters as ’Roll-back Sinha’ for putting back certain cuts in subsidies, or increases in administered prices of products of public sector undertakings (mainly of petro-products), and Jaswant Singh, who was the Finance Minister of the second half of the NDA tenure, kept up the tempo of liberalisation and reforms, including, in particular, disinvestment of the holdings of shares of certain public undertakings. They carried forward some of the measures that the earlier Narasimha Rao government had initiated, such as that on reforming the banking and financial sectors (in which the report of Mr. M. Narasimhan had played a significant role), and in their own way consolidated on the change in thinking, and the paradigm of development in the country that had marked the governments of Rajiv Gandhi and Narasimha Rao. These measures seemed to have had their impact on the fiscal discipline of the nation with the fiscal deficit dropping from 6.2% of the GDP in 2000–01 to 4.5% by 2003–04, the per capita GDP level rising from

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Rs. 9500 (at 1993–94 prices) in 1998–99 to about Rs. 12000 by 2004– 05, while the poverty level (as per norms adopted by government) apparently dropped from about 36% in 1990–91 to about 23/24% by 2003–04. That was still too high, as it effectively meant that one out of every four Indians was still below the poverty line. The belief held by many in authority for long that private consumption in India should be subservient to public consumption was no longer held to be universally true. The private citizen wanted to consume, and he wanted to know the specific grounds on which he should refrain, or be restrained from consuming what he wanted, when he wanted. After all, it was his money; he had earned it. This change of attitude was reinforced to an extent by the fact becoming progressively clear that the government and the public sector could employ only about 10% of the households in India and provide a per capita income of about Rs. 50,000, whereas the private household sector (whether rural or urban) provided for the balance 90%, whose per capita income was much less, at about Rs.18000.

The belief held by many in authority for long that private consumption in India should be subservient to public consumption was no longer held to be universally true. The private citizen wanted to consume, and he wanted to know the specific grounds on which he should refrain, or be restrained from consuming what he wanted, when he wanted. After all, it was his money; he had earned it. This change of attitude was reinforced to an extent by the fact becoming progressively clear that the government and the public sector could employ only about 10% of the households in India and provide a per capita income of about Rs. 50,000, whereas the private household sector (whether rural or urban) provided for the balance 90%, whose per capita income was much less, at about Rs.18,000. There were some commentators who felt that India had ceased to be a welfare state as originally envisaged by Nehru, and had turned into something of an elitist state with government employees, at 10% of the number of households, accounting for 26% of the private final consumption expenditure. Against this, the private households with

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90% of the numbers, accounted for 74% of the private final consumption, and in turn had to bear about 97% of the total savings and tax yields to support the government programmes. Whether by deriving from the Laffer Curve (which relates tax yields to tax rates), or in spite of it, corporate tax yield relative to the capital employed, increased by 425% between 1990 and 2003, and tax relative to net sales of corporates rose by 230% over the same period. These studies, as Prasad noted, gave a rank correlation between growth of private final consumption expenditure (PFCE) to GDP growth as high as 0.94, and between growth of governmental final consumption expenditure (GFCE) and GDP of only 0.22. What sharply struck Prasad as being a manifestation of some major imbalances in the economy, and in economic policies, was that these studies threw up the point that GFCE had grown (at 1993–94 prices) from 5.82% of GDP in 1960–61 to 12.68% of GDP by 2000–01 (that is, after the acceptance of the Fifth Pay Commission Report), while PFCE had declined from 85.2% to 61.68% of GDP over the same period. In other words, as Prasad managed to work out, this meant that GFCE had been growing at about 6.62% over the last four decades relative to the growth in PFCE of 3.72%. The declaration by Jaswant Singh in his Budget Speech in Parliament that he proposed to put more money in the purse of the housewife so that her family could look forward to a decent life had not come a day too soon. Although a good body of commentary had developed since the 1990s on the negative aspects of the process of liberalisation in terms of stagnant employment opportunities and increase in the prices of a number of essential products, particularly the issue price of rice and wheat in the public distribution system, and in the administered prices of petrol and diesel, whatever Prasad saw in the official statistics (irrespective of which government was in power) seemed to suggest something more was also happening. For one, the GDP growth rate (at 1993–94 prices) had accelerated beyond the 6% achieved in 1999–2000 to about 7% by 2003–04, and the net foreign exchange balance which had fallen in 1990 to only about 20 days import value had risen to cover about 14 months (the foreign exchange reserves having risen from USD 97 billion

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in 1999–2000 to USD 107.5 billion. by 2003–04). Certainly, the consumers at large seemed to be more than satisfied with getting a decent colour TV or a refrigerator within Rs. 10,000, or a washing machine at Rs. 8000, a motor cycle within about Rs. 50,000, or a new motor car at Rs. 2 lakh or so. According to most reports, this phenomenon was not confined to urban areas only, as it seemed that sections of consumers in rural areas had also climbed on to the consumption band-wagon, and were happily splurging on themselves. It was not as if only TVs or cars were selling; a large number of motor cycles were purchased in rural areas for ease of transport of both produce and family members, besides a growing number of tractors of all sizes and shapes, threshing machines, and so on. Of particular interest to Prasad, something he had privately dreamt of since the early 1970s, was that occupations in rural areas in many parts of the country were no longer confined to growing and harvesting of rice, wheat, and other cereals, but covered small workshops for repair and maintenance of tractors, harvesting and threshing machines, warehousing (including refrigerated storage), transport services, horticulture, pisciculture, floriculture (increasingly), apiaries, growing of medicinal plants and fruits (what with use of ayurvedic formulations growing rapidly), besides the traditional crafts of handloom, pottery, leatherworking, iron smithies, and so on. These were often adding up for quite a bit, of about 25 to 30%, to the traditional income from growing of food crops, and no one was complaining. Also, it was becoming clear that the rabi crop, which is sown in late autumn and harvested in the following spring, was becoming increasingly important as a supplementary provider of food grains as well as rural income. As Prasad understood it, in terms of modern financial jargon, these developments had led to significant ‘de-risking’ of the conventional cultivation pattern, which was still too dependent on the monsoons. Thus, whether the monsoons were sufficient or deficient, at least a good part of the rural populations were secured to some extent against its vagaries with the alternative sources of income to fall back upon. An added element, as Prasad, with his interest in forests and wildlife, found was that Joint Forest Management (that is a joint, cooperative

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effort between the Forest Department and the local villagers in afforestation and protection of forest lands) was becoming popular since the 1990s and gathering momentum across the country. Villagers—especially tribals, who are usually amongst the poorest, and their womenfolk in particular—were able to find their fuelwood without much cost of time or money, and could also share with the Forest Departments of the respective state governments, the usufruct by way of building timber, or minor forest produce like bidi leaves, sal seeds or karanj pods (good sources of vegetable oils), wild honey, tamarind pods, and mahua flowers, used extensively in liquor production in rural areas. These were a welcome means to relaxation after a hard day’s work for many, and brought sizeable excise revenue for government in the bargain. Again, no one was complaining. But all this, as Prasad knew at the bottom of his heart, found little or no reflection in the national income accounting system, although it constituted a good part of rural income and thus should properly form a part (some said as much as 3% to the GDP, directly and indirectly) of the national GDP. If the rural populace, and the poorer sections in particular, had now some more money in their pockets— although not a big sum by any means—that was all to the good. Fortunately, by this time government had properly instituted a number of independent regulatory bodies such as the Securities and Exchange Board of India, and the Insurance Regulatory and Development Authority of India, that would act as watchdogs on the proper functioning of the share and insurance markets, so that the savings of the public as investment in shares, or by way of life or general insurance were made secure as far as possible. Other regulatory authorities that were also set up at that time were the Tariff Regulatory Authority for the telecommunications industry, and the Power Tariff Regulatory Authority to make independent assessment of power tariff rates for power generating and distributing agencies. At the same time, in conjunction with the Reserve Bank of India, government really began to ‘talk down’ the prime lending rate of the banks through a step-by-step approach in augmenting liquidity in the market. This, as Prasad saw, had the dual effect of reducing the interest burden of the government on its debts, and encouraging

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industries to take up new projects and plans at a reasonable rate of, say 10%, as against the prime lending rate of 15 to 16% some 15 or 20 years earlier. Inevitably, this also meant that the interest that government itself paid out on the various small savings schemes such as the Public Provident Fund and Postal Savings Schemes had to be re-adjusted in keeping with the bank rate. To have retained any significant differential between the bank deposit rate and the post office or the public provident fund, or the National Savings Certificate rates would have meant that government would have to provide for subsidization of the higher rates in government savings instruments, besides drawing off deposits from banks, which really had to play the lead role in financing trade and industry. However, this rate cut on postal savings, etc. was found unpalatable to many depositors. What many failed to realise was that one could not have the bread buttered on both sides. Many however gained substantially as the rate of interest on house-building loans, and for acquiring consumer durables such as a motor cycle, car, or a refrigerator came down and, as Prasad could see all around the country, particularly in Calcutta where he lived, there was a significant real estate boom. But, as often happens in an open democracy, some of the opposition parties went into quite a song-and-dance, as Prasad saw it, in trying to protect the interest payable on employee provident fund accumulations by willfully shutting their eyes to the larger benefit to the country with the lowering of inflation rates to about 5 to 6%, and lower interest rates that benefited a large swathe of the populace. Some sections of the politicians seemed to be shy of displaying their intellectual faculties— and, together with it, their intellectual honesty—in public debate. While bank deposits provided the much needed security and liquidity, people increasingly found—again, in both urban and rural areas—that investment in shares or debentures could be a good option if one did not go overboard with it. Prasad had also made some investment in shares, first through the Unit Trust of India (a wonderful innovation in 1964 by which retail investors could get exposure to the stock market with the minimum of risks), and his widowed mother and he benefited from the steady 10 to 12% dividend year in and year out, together with

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a slow growth in capital appreciation from 1968 up to about 1992, when they sold out shortly before UTI was found over-stretched due to some over-ambitious investment plans. In respect of some of the others stocks that Prasad had purchased, he gained little in some, and much in others; sometimes to the tune of 500% in capital gains on the share value. Little wonder therefore that more and more people flocked to the stock market and, while some lost and possibly many gained, the national shares indices kept climbing month after month. At the same time, the premium income on new insurance policies also showed remarkable growth, pointing to the fact that more people were now able to invest more on a long term for the future. With people turning to investment in shares, industries found it much easier to raise equity funds from the public rather than going in for bank loans. Thus, public equity issues climbed from about Rs. 15 billion in 1995–96 to Rs. 178 billion by 2003–04. This would have been unthinkable just 10 or 15 years earlier. With SEBI policing the public issue of shares and ensuring proper disclosure of information, people had more confidence and were prepared to take more risks, although it was true that some—perhaps too greedy or too impatient—badly burnt their hands in the process. That such eventualities were not the outcome of the market forces was brought home by the case that came to be connected with the name of Harshad Mehta where some bank officers were later found not to have complied with necessary documentation and formalities in making the share transactions. The market cannot always deal with malafide intentions and personal corruption. But, at the end of the day, many people gained and a new sense of “can do” emerged among the people. Another significant initiative of the NDA government was in respect of building up the infrastructure of roads and railways. Prime Minister Vajpayee took a personal interest to see that a ‘Golden Quadrilateral’ of multi-lane highways was built to link the west to the east, and the north to the south of the country, and also sanctioning more for doubling railway lines and for gauge conversion (from metre gauge track to the standard broad gauge railway tracks to speed up goods movement).

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These steps served the two-fold purpose of facilitating easier and speedier movement of goods and of people, and enhancing market accessibility for industry and trade. This also had the spin-off effect of encouraging the growth of the iron and steel, cement, coal, aluminium and their associated mining and other industries—many of which function in backward areas of the country—that had been in doldrums since 1997–98. Together with building highways, the government also liberalized the airlines sector, by removing the monopoly of Indian Airlines and allowing Jet Airways, Sahara, Modiluft, Deccan Air and others to enter the fray; the services improved and fares dropped significantly in just a couple of years. These steps served the two-fold purpose of facilitating easier and speedier movement of goods and of people, and enhancing market accessibility for industry and trade. This also had the spin-off effect of encouraging the growth of the iron and steel, cement, coal, aluminium and their associated mining and other industries—many of which function in backward areas of the country—that had been in doldrums since 1997–98.

It was perhaps a reflection of the changing attitudes that one of the most popular TV shows around that time was Kaun Banega Crorepati? Millions of people followed the serial avidly participating as viewers and dreamers about those elusive millions. It was beginning to seem that becoming rich by dint of one’s own efforts and wits, or running a business profitably with equity capital and bank finance as required—rather than on government subsidies or hand-outs—was becoming acceptable socially and politically. This would have been unthinkable just 20 years earlier. Another development at about the same time was that the Indian IT industry that had started getting attention since 1997–98 during the ‘Y2K’ days, grew phenomenally over the next four or five years. Not only were they getting business for software development from different parts of the world, but were also contributing significantly to the efficiency and productivity of the domestic industry and trade, banking, insurance,

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and so on. Attracted by this growth, world leaders in software and hardware such as Microsoft, Dell, IBM, Intel, and others set up research and manufacturing establishments in India. The liberalisation process and the growth of the Indian economy—the GDP was by now growing at about 7–8% per annum—also drew major automobile concerns like Ford, Fiat, Toyota, Honda to set up manufacturing units in the country. These developments also set off a spurt in technical and management education in the country with mushrooming of many such institutions. ‘Campus interviews’ and ‘placements’ became new watchwords among the young. At the same time quite a few of the brightest and best from the IITs and from the academies for management education achieved highest achievable positions in India and abroad in a wide cross-section of industries and services, be it in computer technology, biotechnology, banking, fast-moving consumer goods and so on. The nation shared and revelled in their achievements. However, for some reason or the other, in spite of the upswing in the economy, and a general feeling of buoyancy, the NDA government was not able to garner the votes at the general elections in 2004, and the United Progressive Alliance, with Dr. Manmohan Singh this time as the Prime Minister, assumed the reins of government.

Chapter

11

The ‘Aam Aadmi’ Way

In spite of some initial hiccups that characterises the Indian democratic process, the United Progressive Alliance, with Dr. Manmohan Singh as Prime Minister, assumed the reins of government in May 2004. There were high expectations from Dr. Singh and his dream team of Mr. P. Chidambaram, as Finance Minister, and Dr. Montek Singh Ahluwalia (recalled from a senior assignment in the World Bank) as Deputy Chairman of the Planning Commission. People held high hopes that the economic reforms process, in which all three had played a significant role in the early 1990s, and which had triggered the significant rise in the growth rate of the economy, would further progress. This would enable the country to look forward to growth rates of 9 to 10% that China had been witnessing since the 1990s with its own version of ‘socialist market economy mechanism’ (a wondrous ‘catch-all’ phrase, if there was one), with progressive dismantling of the public sector and considerable freedom for private enterprise—once an anathema of the Communist Party of China—to grow and thrive. But, with little loss of time, great debates erupted in the national media as well as in Parliament on whether the government was, or was

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not, adhering to the National Common Minimum Programme that had been drawn up to obtain the support of the leftist parties. There also developed pressure points claiming that the Fiscal Responsibility and Budget Management Act that the NDA government had introduced in 2001 to bring about a sense of fiscal responsibility with fairly good bi-partisan support should be put in cold storage for ‘some time’. It seemed to Prasad that it was again the case of the four blind men—each feeling a different part of an elephant and insisting (on that basis) that it was a snake, a set of pillars, or a big fan. Somehow, a holistic view was missing, and debates seemed more often than not to be plugging for one constituency or the other, and most times limited constituencies of possibly not more than 15 to 20 million, were made to appear more important than the somewhat larger constituency of the 300 million odd rural poor, or the nation as a whole. Of course, such pleading for particular constituencies was only to be expected in a democracy; but Prasad felt that at times the debates went considerably beyond making differing points of view known and understood, and were more of playing to the gallery. Nonetheless, a number of programmes for direct social intervention— to reach out to the aam aadmi or the common man—were drawn up by the UPA government, the most important of which was the National Rural Employment Guarantee Programme—an extension and refinement of the state level programmes that had already been in force in some places, such as in Maharashtra. This was designed as a direct intervention by government to provide at least 100 days of employment in a year for a prescribed minimum wage for any and all able-bodied persons living below the prescribed ‘poverty line’ in selected rural areas that were the most poverty-stricken. Initially, this was planned for 28 districts as a test case and was extended over the next couple of years to most povertystricken districts. Another important policy measure on the anvil was a sort of social security net for the poor and the unemployed, underemployed or self-employed under a suitable funding system in which the insured beneficiary would contribute just Rs. 1 per month, and the rest would be paid in suitable proportion by the central and the state

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government concerned. Another important measure was the framing of regulations for the setting up of Special Economic Zones in different parts of the country (or SEZ for short, much on the lines of China that had gone whole hog for them in the mid-1980s). The SEZs would enjoy certain tax incentives and operational conveniences not normally available in others parts of the country. It was not as if this had not been thought of earlier. In fact, such SEZs had been in operation for nearly twenty years or more, as at Santa Cruz in Mumbai, or Falta near Kolkata, but they had been tied down by various procedures and regulations. Now, with a sense of competition to attract investment, state governments were clamouring—together with their investment partners from the private sector (whether from within India or without)—for central government sanction of their SEZs, or other investment plans. At the same time, the government carried forward certain tax rationalisation and simplification steps that had been pursued earlier by the NDA government, primarily in regard to customs and excise duties, (thanks to some clear-cut, objective, comprehensive reports under the chairmanship of, firstly, Dr. Raja Chelliah, and then of Dr. Vijay Kelkar, the previous Finance Secretary), and in the introduction of the Value Added Tax (VAT) regime (to replace the plethora of state sales taxes, and, progressively, even the central sales tax), so as gradually to replace the earlier MODVAT and CENVAT systems. Thus, the cascading effect of excise duty at one stage of manufacture coming on top of another excise duty at another stage of manufacture, and a third duty at the third stage would be largely, if not entirely, mitigated. The tax would now be on the output value less the input value at a particular stage of processing, or the actual value added at that stage. Work was also actively taken up on the integration of the excise duty (on manufacture) and the service tax (on services) into a unified Goods and Services Tax. By themselves, these measures might have seemed to the uninitiated as just tinkering with some nomenclatures and procedures. But their significance in building India into one whole, huge subcontinental market of more than 1000 million people enjoying a GDP growth rate of 7 to 8% per annum (with at least 100 to 120 million

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households enjoying an annual income of Rs.1 lakh and more), Prasad felt, could not be overestimated. With this integration of the market, scales of operation—bringing in economies of scale by minimising fixed costs of production and marketing per unit of output—were getting significantly enhanced. Investors were no longer talking in terms of setting up a capacity for 50,000 motor cycles or refrigerators, but of 200,000 or more. Reliance Industries Ltd. had already set up a 29 million tonne petroleum refinery, and poised to set up another one of practically the same size. Tata Steel was planning to augment its plant at Jamshedpur from 4 million tonnes to 7 million tonnes, or even more. The Steel Authority of India Ltd. (a premier public sector unit) wanted to increase its capacity from 13 million tonnes in its four plants to 21 million tonnes of steel. With this integration of the market, scales of operation—bringing in economies of scale by minimising fixed costs of production and marketing per unit of output—were getting significantly enhanced. Investors were no longer talking in terms of setting up a capacity for 50,000 motor cycles or refrigerators, but of 200,000 or more.

Prasad was also interested to follow the experiment undertaken by ITC Ltd. to set up ‘e-chaupals’, that were digital kiosks set up within a short distance of farms and villages, providing connectivity between village and town, covering, by the beginning of 2006 about 36,000 villages, and serving over 3.5 million farmers. These e-chaupals functioned simultaneously as rural marketing centres for cereals, tobacco, and other cash crops, and also as purchase points for pesticides, seeds, fertilisers, and even consumer durables. This unique facility also had a tremendous potential to inform and integrate the rural markets, and help in raising productivity, reducing cost of produce, and improving price realisation. The other interesting development was that more and more Indian companies were extending their operations overseas to cater better to the overseas markets, or to access essential materials or services, thanks to the vastly liberalised foreign exchange regime and overseas investment norms. Thus, whether it was Infosys, Wipro or Tata Consultancy Services

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in information technology, Larsen & Toubro in electrical switchgear, engineering and projects management, Ranbaxy and Dr. Reddy’s Laboratories in pharmaceuticals, or Tata Industries, Grasim Industries, Kalyani Steels or other big and small industries—they put in an aggregate of about USD 2.7 billion as overseas investment by the first half of 2006 (up from about USD 0.7 billion in 2000–01). In a sense, a contribution towards this rise in overseas direct and indirect investment in India was made by greater transparency and predictability that had come about in economic and commercial reporting, with India moving progressively towards global accounting standards in terms of disclosures and information provided in profit and loss accounts, and balance sheets. Setting up of the Commission for Advance Ruling on income tax, customs and central excise duties that would advise potential investors on possible tax liabilities for different types of projects was also a big help to potential investors. Even on such seemingly insignificant aspects often depend substantial investment decisions.

Besides the multi-national corporations coming into India, there were now Indian multi-national companies operating in places as far apart as the US, Brazil, Bolivia, Europe, Singapore, Korea and China. While this did mean that capital from India was going out to an extent, there were now many international financial instruments, such as the American Depository Receipts, or the Global Depository Receipts and other avenues for raising equity funds overseas by the companies that were getting listed in the NASDAQ or other overseas stock exchanges. In addition, overseas non-resident Indian groups such as Vedanta and Caparo were investing sizeably in India. In a sense, a contribution towards this rise in overseas direct and indirect investment in India was made by greater transparency and predictability that had come about in economic and commercial reporting, with India moving progressively towards global accounting standards in terms of disclosures and information provided in profit and loss accounts, and balance sheets. Setting up of the Commission for Advance Ruling on income tax, customs and central

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excise duties that would advise potential investors on possible tax liabilities for different types of projects was also a big help to potential investors. Even on such seemingly insignificant aspects often depend substantial investment decisions. With the growth rate of the Indian economy steadily rising, concerns over energy availability were rising with it, compelling even the Prime Minister, Dr. Manmohan Singh, to draw the nation’s attention to this aspect. In quick succession, Reliance Industries, the Oil and Natural Gas Corporation, and the Cairns Group struck huge deposits of natural gas and oil in the Krishna-Godavari off-shore delta region in south east India, in Rajasthan and elsewhere, besides the production in Assam, Gujarat and off-shore Mumbai. Thus, the refinery throughput of crude oil jumped from 51.8 million tonnes in 1990–91 to 146.6 million tonnes by 2006–07.

Another important aspect, as Prasad saw it, was the tremendous boost since the late 1990s to exploration and development of oil, gas and coal resources in India, and even abroad. Energy lies at the heart of most human and economic processes, whether it is used by a mother in an interior village cooking the morning meal for the family with firewood, or a chef in a city hotel using an electrical or LPG cooker, or a bus running on diesel or compressed natural gas, or a foundry using an electric arc furnace. With the growth rate of the Indian economy steadily rising, concerns over energy availability were rising with it, compelling even the Prime Minister, Dr. Manmohan Singh, to draw the nation’s attention to this aspect. In quick succession, Reliance Industries, the Oil and Natural Gas Corporation, and the Cairns Group struck huge deposits of natural gas and oil in the Krishna-Godavari off-shore delta region in south east India, in Rajasthan and elsewhere, besides the production in Assam, Gujarat and off-shore Mumbai. Thus, the refinery throughput of crude oil jumped from 51.8 million tonnes in 1990–91 to 146.6 million tonnes by 2006–07. Coal India Ltd., and its subsidiaries were planning to develop coal bed methane gas trapped in-between the coal seams in many parts of

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the country, in addition to raising the production of coal for meeting the growing industrial requirements. The production of coking and noncoking coal (excluding lignite) rose from 211.7 million tonnes in 1990–91 to 430.8 million tonnes in 2006–07. Electric power generation rose from 264.3 billion kWh in 1990-91 to 667.5 billion kWh by 2006–07. The most remarkable of all was the growth of the capital market where the value of initial public issues of equity shares (a major source of funds for companies) rose from Rs.10,750 crore in 1992–93 to Rs. 33,900 crore by 2007, while the Sensex (the widely-accepted index of share prices in India) rose to 20,000 by end of 2007. Growth seemed to be everywhere; not only in information technology, but also in steel, cement, aluminium, ceramic decorative tiles, glass, textiles, garments, and even, increasingly, in pre-cooked or semi-processed food-stuffs that Indian mothers had generally sniffed at so long. Growth was becoming all-pervasive. Exports were rising at an astonishing level of 22 to 24% per annum, something that had not been seen in the first four decades of Indian economic growth. It was as if some hidden energy had been unlocked in the sinews of Indian enterprise, and, whether because of active government support, or in spite of it, they just seemed to run off with the bit in their collective mouths. Thus, the country was able to witness growth of gross domestic product—a good index of national income trends—of 8.5 to 9% and more during 2005–06 and 2006– 07, something that the nation had only dreamed of and had never been able to achieve. It is sometimes lost sight of that a rise in growth rate from 7% to 8.5% (or, just 1.5% nominally) means factually a relative rise of more than 21% in the growth rate. Percentages do matter. Of course it was not roses all the way. The Coal Mines Nationalisation Amendment Bill was hanging fire in Parliament since 2000, and private investors interested in developing the coal mining sources for both their own needs as well as for commercial purposes ( supplementing the production of Coal India Ltd., a public sector unit) were held back. In the process, India, which enjoyed about 200 billion tonnes of coal resources was forced to import coal since 2002–03 (though much of it was coking coal), as domestic production could not keep up with rising

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demand of industries and power generation units. To a limited extent, government was releasing coal blocks for captive development by steel, thermal power, cement and sponge iron industries only. But this was much less than the overall requirements for these as well as other growing industries. The potential for growth in crude oil production and refining was hampered by the government being unable to move out of the ‘administered price mechanism’ or APM for the price of petrol, diesel, kerosene and LPG owing to political pressures, in spite of the spiraling rise in the price of imported crude oil, resulting in the oil marketing companies losing crores of rupees every day. The banking and insurance sectors also required further consolidation and capital provisioning, and this had got bogged down in long debates with the UPA partners on how far, and under what conditions, to infuse capital, especially foreign direct investment, or off-load some of government’s own equity holdings, or encourage mergers of banks to complement their capital base and retail banking operations. The same was the case with the modernization of some of the major metropolitan airports. It was with some effort that government was able to work out a plan for private investment to modernize and expand the airports at Mumbai, Delhi, Hyderabad, and Bangalore (the hub of the IT sector) but it was anybody’s guess whether, or when, similar modernisation of Calcutta, Chennai and other up-and-coming cities like Bhubaneswar and Ranchi would be taken up. To an extent this uncertainty arose from a lack of clarity, and some degree of confusion, at the policy-making level as to what constituted national infrastructure projects that would help strengthen economic activity over the long term, and what should be the financial norms for projects that may not get any returns on investment for possibly four to five years. Where private enterprise was able to decide and go forward on its own, it surged ahead. This period saw the spectacle of Indian enterprises such as that of L.N. Mittal Group (no matter that it was largely based in London) beating back international competition to acquire ARCELOR, one of the largest steel makers in the world in a multibillion dollar deal that many in India had only dreamed of, but could

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not achieve. The Tatas followed shortly afterwards by acquiring CORUS, also one of the largest steel makers in the world in a similar multibillion dollar buy-out. These acquisitions brought a sense of satisfaction amongst the government and large sections of the people that Indians could also dominate certain sections of the world market. Tata followed up by acquiring also the Jaguar-Rover group in the UK. Several other Indian groups took up investment overseas, such as the Aditya Birla Group, Jindals, Kalyani Steel, TVS, Murugappa and others. This would not have been possible, and perhaps would have been frowned upon by the powers that be, twenty years earlier. At the same time, some of the aam aadmi programmes of the UPA government through direct intervention threw up mixed, or unhappy results. As Prasad saw from different reports in the press, Sreelatha Menon writing from Rajasthan and Haryana, drew attention to the number of fake entries that siphoned off extra cash over what was actually paid out to beneficiaries under the National Rural Employment Guarantee scheme. The muster roll (a key document on the number of beneficiaries and the cash amounts paid out) was more often than not ‘missing’ and seldom produced for spot verification. People who had not actually worked were given the beneficiary cards under the project. But most of all, the rural people who wished to render work were often permitted to apply only when the village ‘sarpanch’ or headman deemed it fit. At times, the junior engineer concerned who advised on the projects to be taken up (such as check-dams, irrigation channels, or roads or such other schemes that would benefit the countryside) was found missing or had not been appointed by government. Menon mentions that even block development officers, who are the key to the project, were not appointed or were overworked, with two BDOs handling five blocks in some instances. In many, if not in most states, other central programmes, be it under the Pradhan Mantri Gramin Sadak Yojana (for construction of rural roads and improving connectivity), the Indira Gandhi Awas Yojana (for building rural housing), the Sarva Shiksha Abhiyan (for universal primary education), the Integrated Child Development Programme or any other, saw shortfalls in performance by anything between 40% and 60%. Even

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if a substantial part of the money was spent, the ground realities by way of actual availability of roads, housing, schools, health centres and so on were different. Retailing of goods got a new face and a new start, not only in the major metropolises, but progressively in most of the larger cities; though not without a lot of political wrangling. Another major initiative of the UPA government was the enactment of the Right to Information Act, largely at the urging of the Prime Minister and the Congress President. This Act, at a stroke, gave the humblest of the humble the right to know from government any information that did not impinge on any aspect concerning state security or strictly confidential papers or notes. The application format and the procedures were still cumbersome; but it was the beginning of the process of ascertaining, and thus also calling to account, the actions (or lack of them) of government officers or agencies on any plea, application or representation. It has often been said that information leads to knowledge, and knowledge leads to power. In this light, the RTI Act was a major instrument for empowering the common people. The start made during the NDA regime by some ministries in the Government of India to set up websites about their work, targets and achievements was further extended and improved during the UPA government, and some of the websites, such as that of the Ministry of Commerce, the Ministry of Finance, the Planning Commission, the Central Statistical Organisation have been found to be highly informative and useful. Arising out of the growing concern about energy availability and prices, the earlier NDA government had initiated negotiations with the USA on a nuclear deal to have the international embargo on supply of fissile materials, technology and equipment imposed on India lifted. The embargo had been imposed after India had exploded a nuclear device in 1974 for the first time, and was further enhanced after it conducted certain sophisticated nuclear tests in 1998. The successor UPA government revived the negotiations. This move was vehemently opposed by the leftist parties who were supporting the government from outside. For over a year, there was a see-saw battle of wits and words between the government and the leftist parties. With the fate of the government hanging in the balance, hardly any economic or political initiatives could

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be taken between 2007 and 2008. Political uncertainty has a habit of forcing postponement of decisions. However, the UPA government finally took the decision in July 2008 to force the hands of the leftist parties, and was able to conclude the agreement with the US, followed by associated agreements with the International Atomic Energy Agency and the Nuclear Suppliers Group. The way was now open—albeit delayed by over two years—for India to take up nuclear power projects and thus reduce its dependence on imported crude oil. Interestingly, one of the behemoths of the government, the Ministry of Railways, initiated a number of useful measures to improve its financial position and thus reduce dependence on budgetary allocations of the central government. The first related to freight loading, which was improved by 15–20% with consequent improvements in the earnings of the Railways and holding down of freight rates to the advantage of trade and industry. The second was the decision to introduce a ‘dedicated freight corridor’ that would enable high-speed inward and outward movement of goods. This is a massive project, involving the re-designing and re-construction of a large number of railway bridges, over-passes, re-designing of lines and freight wagons, and is expected substantially to reduce transportation costs and time in the future. This would also significantly reduce fuel consumption and atmospheric pollution nationwide, as road transport consumes far more fuel per tonne of goods moved relative to the railways. After all, a double-headed freight train can comprise 52 to 55 wagons, each carrying 50–52 tonnes as compared to 10 tonnes in a truck. The third interesting development was the progressive substitution of fixed pairs of trains for particular routes by rakes that may be doing Kolkata-Asansol in the morning, and Kolkata-Jamshedpur in the evening, thus substantially reducing the capital and recurring costs of fixed up-and-down pairs of passenger trains. The lower demands by the railways on the Union Budget meant that funds could be released for other, essential social programmes. These measures attracted a good deal of attention, and for a change the Union Railway Minister, Mr. Lalu Prasad Yadav, was being invited to address management students in IIMs and management conferences. It was all to the good. At the same time, it may be noted, there were many among the cognoscenti

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who considered the so-called ‘turn-around’ of the railways financial position as being of uncertain character. After all, as some statistics showed up, the emoluments of employees of central public sector undertakings had risen to an index figure of 5402 by 2006–07 (relative to a base of 100 in 1970– 71) as compared to the consumer price rising to an index figure of 1386 over the same period. It seemed of little consequence that between 1970–71 and 2005–06 the per capita net national product (which closely approximates the per capital income) at constant prices rose from Rs. 5002 to Rs. 20,703, that is four times, as against emoluments of the public sector employees rising by more than 50 times. Well, Prasad consoled himself, the ‘cost to the company’ of many private sector executives had possibly risen by 20 times in the same time. So much for socialism.

In the middle of all this, Dr. Manmohan Singh quietly announced and implemented the Sixth Pay Commission report for central government employees. For a change, the opposition parties and state governments kept a quiet profile on this, with the painful memories of the Fifth Pay Commission possibly being still fresh in the mind. After all, as some statistics showed up, the emoluments of employees of central public sector undertakings had risen to an index figure of 5402 by 2006–07 (relative to a base of 100 in 1970–71) as compared to the consumer price rising to an index figure of 1386 over the same period. It seemed of little consequence that between 1970–71 and 2005–06 the per capita net national product (which closely approximates the per capital income) at constant prices rose from Rs. 5002 to Rs. 20,703, that is four times, as against emoluments of the public sector employees rising by more than 50 times. Well, Prasad consoled himself, the ‘cost to the company’ of many private sector executives had possibly risen by 20 times in the same time. So much for socialism. Certainly, it did seem that the recommendations of the Sixth Pay Commission were more modest than that of its predecessor, and some improvements in the government staffing patterns and systems were also sought to be made.

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Only the coming years would show up if any definite improvement could be achieved. A major initiative of the UPA government having both political and economic significance was the decision in 2007 to write off about Rs. 65,000 crore of rural bank loans. While no doubt large sections of the farmers and agricultural workers suffered under a heavy burden of loans from the banks and other financial institutions, the writing off of the loans was sure to impact the financial position of the public sector banks and their future cash flows. At the same time, the measure would possibly enable the farmers to start anew with investment in seeds, fertilizers, land improvement, irrigation, and so on. Only the coming years would show if the agricultural sector had gained overall in the process. However, despite the economic upswing, some tremors began to be felt since the middle of 2008 with reports, and impact, of the failure of the ‘sub-prime’ market in the US. A large part of the US consumer demand, whether for housing or motor cars or other consumer durables, is based on credit; that is, to make a purchase without having the necessary cash actually in hand. There is nothing intrinsically wrong in this kind of transaction, except that one needs to be extra cautious about likely future cash inflows to meet such liabilities, and also to monitor closely possible increases in the liabilities, so that it does not outstrip the expected cash flows. Data suggests that as much as 25% of the housing purchases in the US between 2002 and 2005 were not for immediate residential purposes, but as a form of investment, or one could even say, for speculation. Notably, in the US, much of the house-building loans were on adjustable or ‘floating’ rate basis. Quite a few of the mortgage financing or re-financing institutions had been less than prudent in assessing the risks of the market, and had lent without due regard to the credit-worthiness of a borrower. Once the housing costs started rising, the floating rate also started rising, leading to defaults in housing loan payments or mortgages. Since such credit requires some back-up finance of a bank or some other financial institution, and therefore also some re-finance, it had become something like a ‘merry-go-round’ with IOUs

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doing the circuit and ‘passing the buck’ as it were. But, somewhere, the buck stops, and a call for payment of an IOU fails. Then the second fails, and then the third and the fourth, and suddenly much of the consumer demand, whether for housing or for consumer durables, falls like a house of cards. Even major banks and financial institutions faced severe cash crunch, including big names like the Citigroup, Merrill Lynch, Lehman Brothers and others as well as financial and securities organisations like Fannie Mae and Freddie Mac. Some of the institutions just folded up, or were sold for a song or pleaded with government for a bailout. This was bound to have an impact on nations trading with the United States, particularly those depending on exports to the US for 30–60% of their international trade. Progressively this impacted other developed countries like the UK, France, and Germany, where also several banks failed, leading to distress for depositors. Governments had to come forward to bail them out. In the US alone a Dollars 730 billion financial assistance package (or about Rs. 3,500,000 crore) was worked out, with lesser amounts in the European countries. In the Asian continent, Japan, China, Thailand, and also India to an extent, were affected in so far as they depended on exports to the US and the European Union. Because of the financial failures in the US, many of the overseas investors—whether private or institutional—pulled out their dollar investments from the Indian share market leading to a precipitous fall in share prices by over 50%, with the Sensex falling from 20,000 in December 2007 to 8000 by September 2008. At a stroke, the public issues for raising of equity funds through the share market were put at risk. Secondly, the growth of exports slowed down from 27% in 2003–04 to 12% during 2008– 09, that is, a drop of more than 50%. The exchange rate of the Rupee in relation to the US Dollar also fell from Rs. 44 to about Rs. 51 temporarily (and the Rupee-Euro rate from Rs. 56 to Rs. 67) within the same span of time, substantially raising the cost of imported equipment and raw materials. But there were other factors also at work. Because of the global economic boom during the period 2005 to 2007, crude oil prices went through the roof, hitting about USD 104 per barrel in 2008, compared

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to USD 65 five years earlier. This was bound to impact India, which imports about 65–70% of its crude oil requirements. Oil companies like Indian Oil Corporation, Bharat Petroleum and others started to make heavy losses as the retail price of petrol, diesel, kerosene, etc. were not revised following the price increase in crude oil (from which they are derived). Government had to buckle down to stark economic realities and revise the prices of petrol, diesel, and LPG after much political pulls and pressures. This, together with the overall boom in commodity prices for iron and steel, cement, coal, copper, aluminium, etc., (for much the same reason as that for crude oil) led to the inflation rate rising to about 11% by the middle of 2008. With his ‘zero tolerance’ to inflation (for, as an economist, he could understand and anticipate the distress it would cause to large sections of the population having fixed or low income levels), Dr. Manmohan Singh moved for monetary measures through the Reserve Bank of India with successive increases in the cashreserve ratio, the Repo rate and, finally, the prime lending rate, to drain away any excess liquidity in the market, and to make it more attractive for people to save their monies. He had done it earlier in 1993–94 during his previous tenure as Finance Minister to bring about a cooling off in the economy and reducing the pressure on the price level. He did it again in 2008, with much the same results: checking the price rise, cooling the economy (especially the housing and commodities sectors) and preparing to face a recession for a year or so if need be, to achieve this policy objective.

With his ‘zero tolerance’ to inflation (for, as an economist, he could understand and anticipate the distress it would cause to large sections of the population having fixed or low income levels), Dr. Manmohan Singh moved for monetary measures through the Reserve Bank of India with successive increases in the cash-reserve ratio, the Repo rate and, finally, the prime lending rate, to drain away any excess liquidity in the market, and to make it more attractive for people to save their monies. He had done it earlier in 1993–94 during his previous tenure as Finance Minister to bring about a cooling off in the economy and reducing the pressure

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on the price level. He did it again in 2008, with much the same results: checking the price rise, cooling the economy (especially the housing and commodities sectors) and preparing to face a recession for a year or so if need be, to achieve this policy objective. There was some degree of reduction in staff strength, and salaries in the IT and financial sectors which had gone through the roof, were getting adjusted to more realistic levels. There was considerable grumbling amongst the trade and industry over this “belt-tightening”, but better that than a full-blown financial crisis and liquidation of companies as in the US at a later date. It seems that the downslide in the economy has been arrested somewhat, but it would take the better part of 2009–2010 to stage a recovery. India, it now seemed, could only go up. In the middle of all this however came the unfortunate news about the financial misdeeds of Mr. Ramalinga Raju in his flagship company, Satyam Computers. Once the darling of the Indian IT industry, and standing fifth or sixth in the industry ranking, suddenly Satyam seemed to topple over like a house of cards, and over Rs. 5000 crore of company assets just disappeared into thin air. It seemed to be another case of ‘private profit at public cost’ arising from private greed. The incidence became all the more shocking because a reputable audit firm, PriceWaterhouseCoopers, apparently either turned a blind eye to the financial misdeeds or, was seemingly wanting in diligence entrusted to it by the shareholders. As the year 2008 drew to a close, Prasad wondered why was it that some sizeable sections of Indian politicians were becoming increasingly out of synchrony with what the populace wanted? Was it because they could not get out of the earlier mindset that they had to do handholding for a large section of the people for as long as possible, so that something would stick to the sticky fingers that some of them had? But the country had not stood still for the last five decades: the infant economy of the 1950s had grown greatly in extent and depth, and had matured. The economy and the social conditions had moved on. Incomes and economic opportunities had improved, even if not to the extent as envisaged in the five-year plans. There was a growing and widespread

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‘can-do’ attitude. The future was beckoning. People wanted to break out of the age-long vicious cycle of low growth and poverty, and enjoy new opportunities for education, health, food, clothing, shelter, travel, and recreation. They did not mind working hard, or harder, for these amenities. Empowerment they had enjoyed to varying degrees since the inception of parliamentary democracy in India; now they were being increasingly enabled. That seemed to make all the difference.

Chapter

12

At the End of It All

The struggle of man against oppression is the struggle of memory against forgetfulness. —Milan Kundera ‘In the end, we are all dead’. Prasad knew that was certainly true of individuals. Turning sixty and at the verge of retirement, with a bit of a heart ailment thrown in for good measure, Prasad felt in himself a stirring sense of mortality. This was also true of institutions; for some of the organisations he had served were either in arthritic somnolence, or in some bemused mid-life crisis. But what of a nation? There had been nations in history that had grown over centuries, and had then fallen into bad times, been diminished, fragmented, or absorbed by another in the process. Or had at least changed its name. Examples of the empires of Darius and Alexander, and later of Harshavardhana in ancient history, and the more recent examples of East Pakistan, Soviet Russia and Yugoslavia, Papua and New Guinea came readily to mind. What of India? India too had changed from what she had been in 1917 and what she became thirty years later, at the stroke of midnight on 15 August 1947. What of India? What was to become of her?

160 Eco-Yatra In 1951–52, when India embarked on that epic journey of a parliamentary democracy, the population of the country had been about 350 million. The gross domestic product (an easy ‘rule of thumb’ measure of economic growth) was then about Rs. 9550 crore (at current prices, as gleaned from the Economic Survey annually published by government). Life expectancy at birth was about 34 years, and only about 24% of the adult population was literate. The production of wheat and rice had been around 51 million tonnes, and per capita availability of cereals (inclusive of coarse grains) was about 330 gram per day. Production of coal had been about 32 million tonnes, and the thermal power output just about 2000 megawatts. Surface roads had been 157,000 kilometres, and the railway system covered about 54,000 kilometres. That was it.

In 1951–52, when India embarked on that epic journey of a parliamentary democracy, the population of the country had been about 350 million. The gross domestic product (an easy ‘rule of thumb’ measure of economic growth) was then about Rs. 9550 crore (at current prices, as gleaned from the Economic Survey annually published by government). Life expectancy at birth was about 34 years, and only about 24% of the adult population was literate. The production of wheat and rice had been around 51 million tonnes, and per capita availability of cereals (inclusive of coarse grains) was about 330 gram per day. Production of coal had been about 32 million tonnes, and the thermal power output just about 2000 megawatts. Surface roads had been 157,000 kilometres, and the railway system covered about 54,000 kilometres. That was it. Even with his very elementary knowledge of economics, Prasad had realised since his college days in the early 1960s that to lift up this huge country of about 400 million people then (of whom nearly 300 million were in rural areas steeped in poverty), by the boot-straps would require a phenomenal—and planned and concerted—effort. That was why, heart and soul, he had read and dreamt about the plan effort pushed through in the successive five year plans since 1951. He had looked for the first stirrings of change and growth as eagerly as the farmer looks to the first shoots in the seed-bed after the first rains. After the initial quickening in

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the 1950s and sixties, somewhere somethings seemed to have gone wrong, either due to domestic or external reasons, and the momentum—and the focus—seemed to have been lost. Lost somehow, in the plethora of evernew projects, mid-term reviews, annual plans, political catchwords and slogans, and last, but not the least, money thrown after more money that his middle of middle class sensibilities revolted against. Perhaps it was his petit bourgeoise mentality, which some of his friends in college had at times taunted him about, that prevented him from seeing the rapid emergence of the promised socialist pattern of society that was then under construction. Instead Prasad saw only figures; figures that said somethings, and left unsaid many other things. For, plan documents and other studies showed up that between the First Five Year Plan that commenced in 1951–52 and the Fifth Plan that concluded in 1978–79, the population had grown to about 650 million, and the government had spent an aggregate of about Rs. 89,713 crore over this period. This had resulted, in conjunction with cumulative capital investment by the private sector of Rs. 111,877 crore over the same period, in a GDP of approximately Rs. 121,000 crore (at current prices) by 1979, as compared to the GDP of Rs. 10,560 crore in 1951–52, or an annual average rate of increase of 4.02% over these years. There had also been an improvement in life expectancy to about 42 years, and adult literacy level of about 44%. At the same time, the consumer price index had risen by about 16% per annum on average over this 25 or 26 year long period. Rural employment had grown from about 139 million in 1951 to 245 million in 1980, or by just 2.6% per annum over this span of time. Employment in the organised manufacturing, trades and services sector over this period had grown from around 105 million to about 200 million, or by approximately 3.1% per annum. Per capita cereals consumption by 1979–80 was around 380 grammes per day. Somehow it seemed to Prasad that while the prodigious plan effort over nearly 30 years had achieved a good deal, the results in terms of health, literacy, nutrition, employment and income had not by any means been commensurate with the effort. Why had this been so? Could it have been any different?

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With his impending retirement, Prasad had now more time to read up more books on the Indian economic scenario, and brush up his 40year-old ideas on growth and development. The intimations of mortality riding on the heart ailment seemed to have brought about a clearer frame of mind. The forest of jargon and public posturing seemed to have been pushed back, and he could now perhaps more clearly see the woods in spite of the trees. He read, firstly, of the wise words of Dr. Bidhan Roy, then Chief Minister of West Bengal who, writing to Prime Minister Nehru in June 1955 stated that the principal object of planning should be to enhance the power and capacity of the people; the plan strategy should be so devised that the common man should realise that the plan has been formulated to improve his lot. Somehow these ideas, and Nehru’s own thoughts articulated in his address to the nation on 15 August 1947 to banish poverty, hunger, disease and ignorance amongst India’s millions, had not formed the single, invariable focus of the five year plans. The social structure was too diverse, the economic power centres too many, and constantly shifting, for a ‘command economy’ to be properly set up and deliver results. That had been possible in Soviet Russia and in Communist China, but how was it to be set up and made to work within the framework of a parliamentary democracy as in India? As Ashish Nandy, the noted sociologist had once observed, in India there was seldom a clear-cut choice between chaos and stability; the choice was rather between manageable and unmanageable chaos, between human and inhuman anarchy, and between tolerable and intolerable disorder. To begin with, planned development meant many things to many people, and a wide-ranging debate had emerged in the 1950s and 1960s on the principles and the modalities for the plans. As Dr. Bhabatosh Datta, teacher and economic analyst par excellence, had indicated in one of his writings, the devil was in the value-judgement concerning a desireable re-distribution of wealth and income through the planning process. And he underlined the extreme difficulty in a democratic country to arrive at a logically defensible ordering of social priorities from a complex of individual preferences. As he perceptively put it, there could

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be a variety of futures to move towards: the historian would think nothing of a 100-year span, a politician would tend to think in terms of a fiveyear election period. What then of the economist? Would 10 or 15 years be too long, or too short? Dr. Datta put it squarely that the main problem was not really about raising the investible resources, but of properly mobilising the investment component in every targeted sector, which was clearly about administrative efficiency and efficacy. He foresaw that a planned system was bound to raise, face, and resolve a number of conflicts and contradictions that arise in the process of growth. On a couple of major aspects of government plans and policies, Dr. Datta held (writing in 1963) that there was a limit after which even the most complete of physical controls would not yield results. About the buffer stock policy for foodgrains (and the public distribution system that this supported) he was categorical that the gap between the buying and selling prices of government stocks had to be as small as possible. He also foresaw that the net contribution of the export-oriented industries and the import-substituting manufacture (which formed the better part of the planned investment between 1956 and 1978–79) to the balance of payments situation in the country—always critical in India—had to be compared and balanced over a period of time. Simple logic—but who had bothered to listen in those balmy days of industrial licensing, import controls, nationalisation of industries, heady increases in tax rates, and burgeoning public expenditure? As Prasad mulled it over, in addition to the traditional factors of production such as land, labour and capital, the five-year plans and all that they entailed introduced a fourth element—the economic administration, or the bureaucracy. Obviously the plan process required a vehicle, a mechanism; but that was outside the market mechanism in which land, labour and capital played out their inner dynamics. The levers of economic administration were not answerable to the market; in fact they controlled—or at least wanted to control—the market. More, they were not properly accountable for performance and results, as few, if anybody other than themselves could cut through that forest of administrative and financial rules and procedures that stood between

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them and accountability. Prasad had seen a bit of it—only much later— in the FRSR (or the Fundamental Rules and Supplementary Rules in government) and CS (Civil Services) Conduct Rules, and the occasional glimpses at the official file notings as they went up from the section officer to the joint secretary concerned in the department, and came slowly down, possibly after a couple of months. And this had pervaded each and every facet of government, from the ministries that framed the policies, to the instruments of policy such as the Food Corporation of India, the State Trading Corporation, the Heavy Engineering Corporation, Coal India Ltd., and the many other public sector and nationalised undertakings. Most of them did good work in spite of these constraints. But they could have done much better, and contributed much more to the country’s economic growth, given the investment in money, time and effort. As far as Prasad could see, the aftermath of World War II and the partition of the country had imparted their own dynamics that took some time to play themselves out. The Chinese invasion in 1962, the Pakistani aggression in 1965, the movement for the independence of Bangladesh in 1971 and the "oil shock" in 1974 introduced severe shocks to the economy that also took time to be sorted out. There were—equally —internal factors and political movements, and the regular tussles between capital, labour and land-owners for a greater share of the cake that somehow took an unconscionable time in growing, or growing rapidly enough to satisfy the needs and expectations of the various sections of the people. All this had their impact on economic policies, and therefore on growth of the economy. There were interminable debates on equity versus efficiency, as if the country could really afford to substitute wholly one for the other. As Prasad could see, though considerably later, there was really a continuum between equity on one side and efficiency on the other, and one could really have an infinite number of combinations of the two in-between. To resolve this, and to fix on one combination, or a succession of combinations over time, would require value judgement— and a political consensus for this purpose—that Dr. Bhabatosh Datta had written about. The bottom-line was growth, for that would impart

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the impetus for change—be it social, political or economic. Without some movement, some change, nothing else could really go forward. Stagnation could only mean decay, and death. Nehru had understood this and had written and spoken on this more than once, and so had Prof. P.C. Mahalanobis, the architect of India’s Second Five Year Plan, and many, if not most, economists who pondered over the issue of economic growth in India. Economic growth, that is, of output and income, from whatever Prasad recalled of his student days in the Economics classes, was proximately related to investment, and what this investment yielded in terms of additional output. This, in turn, led to the issue of the incremental capital-output ratio, or ICOR, so beloved of economists, and one of the persistent preoccupations and subject of debate amongst economists in India for nearly forty years. This basically came down to a choice whether it would be better for the country to invest Rs.1 lakh and get an additional output stream of Rs. 50,000 per annum for 10 years, or would it be better to go for a yield of Rs. 35,000 per year for 15 years. But even a rational choice—a political choice mainly—often failed to examine and identify the operational mechanisms by which this ICOR may be diminished—rather than increasing to an extent that almost made the investment quite fruitless. From the Olympian heights at which the planners often worked, these operational details seemed insignificant, or worse, irrelevant. The devil was in the detail. Dr. Sukhamoy Chakravarty, the doyen of Indian economists for nearly 30 years till his untimely passing away in 1987, also dwelt on this issue of ICOR and stressed on reducing it. He had remarked in the course of his writings on the relatively high level of ICOR in practically every sector in India, be it agriculture (where it ranged from 2.18 during 1951 to 1960, to 3.17 by 1983–84) or manufacture (where the range was from 4.47 in the 1950s to an unacceptable 14.36 in 1983–84). In other words, it would take Rs. 3.17 investment in agriculture in 1983– 84 to get an additional output of just Rs. 1; or Rs. 14.36 investment in the 1980s in manufacture to derive an additional output of Rs.1. It was as if the country had to run faster to stay in the same place. In spite of

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the heavy public investment for three decades, therefore, the sectoral rates of GDP growth remained what may be politely termed as modest. Agriculture grew at 2.61% per annum in the 1950s to about 2.27% in the 1970s., whereas the growth rate in manufacture actually dropped from 6.11% in 1950s to 4.21% in the 1970s. But when public investment was placed in the forefront by the policy-makers for engineering economic growth in the country, sufficient attention was not apparently given to the possible impact on ICOR due to the persistent reliance from 1950s to 1970s on government-to-government aid, which was ‘tied’ in nature, that is to say, bound by agreement to certain types of projects only, with the further provision that purchases of plant and equipment were to be made solely from the aid-giving country, be it the US, Germany or Japan. Such agreements took time through protracted negotiations to fructify, and often had a built-in extra element of cost for the plant and equipment that was higher than the normal market prices at that time. The second aspect was that the equipment were often not the latest and most modern and, therefore, the efficiency and productivity was less than later models; they had an in-built element of technological inefficiency and obsolescence. The third was that replacement or maintenance was more costly, for the spare parts and accessories could only be sourced from the ‘tied’ countries. It has been noted that in this period the customs duty on the import of these spares and components was actually more than the duty payable on import of the whole equipment. These factors, for all practical purposes, nullified the concessional rates of interest at which these ‘tied loans’ were given, and possibly contributed significantly to the high level of ICOR in those days. There were also the internal factors, such as the official procedures for approvals that some times took two to three years—and each year added at least 10 to 12% by way of additional project costs. The location of these projects—as like as not—was determined on political considerations, and thus the normal ‘locational advantages’ (in terms of nearness to raw material sources, or to major markets) that could improve the yield and profitability of an undertaking were given the go-by. The project took time to be set up on the ground—again by three to four years—before it started producing, and this added 25 to 30% to the

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project costs, which again involved a process for financial approval. It was little wonder therefore that ICOR was high, and thus each unit of investment gave much lower yield than should have been expected. As Prof. Dhires Bhattacharyya, the well-known teacher and writer on Indian economics at the University of Calcutta, had pointed out in one of his commentaries on the Indian five-year plans, the ICOR was in effect the product of the capital/labour ratio (that is, the amount of capital used per unit of labour in a production process, be it in agriculture or industry), and the labour/output ratio (that is, the quantum of labour required to produce a unit of output). Since capital formation leading to the process of economic development in an underdeveloped country could largely proceed if and when the output of wage or consumption goods exceeded the consumption of such goods—be they foodgrains, garments or shoes—it followed that a lower labour/output ratio (that is, a lower labour requirement per unit of output or, put in another way, a higher level of output per unit labour) was at least as important to achieve as a lower capital/labour ratio, or the resultant capital/output ratio. At the same time, it was often lost sight of that the rigours of capital formation in terms of foregoing current consumption and leisure may not be willingly borne by one section of the populace or the other. That this was not entirely unforeseen could be seen from the comments made by Prof. P.C. Mahalanobis, one of the pioneers of the planning process in India, and the author of the Second Five year Plan, in an article (in the Economic & Political Weekly, September 1969), where he observes that labour has been most protective of its interests, and that the then prevalent protection of organised labour acts as an obstacle to growth and serves to increase inequalities. That these words of caution—if not of prophetic wisdom—were thrown to the winds in subsequent political developments, bear recall. Somehow, somewhere down the line, employment generation became the major, if not the sole, preoccupation and focus of the economic policies and programmes. In the process, this tended to pre-empt capital growth, or land generation and re-generation, that would have led to the growth of incomes, and to economic development in the fullest sense of the term. It was somehow lost sight of that land, labour and

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capital had each as much to contribute to economic growth as the other, and that enterprise and technology could also play a good part in the development process. Somehow, somewhere down the line, employment generation became the major, if not the sole, preoccupation and focus of the economic policies and programmes. In the process, this tended to pre-empt capital growth, or land generation and re-generation, that would have led to the growth of incomes, and to economic development in the fullest sense of the term. It was somehow lost sight of that land, labour and capital had each as much to contribute to economic growth as the other, and that enterprise and technology could also play a good part in the development process.

To all this was added the ‘leakages’ by way of inflated bills for maintenance and other operational aspects, and plain misappropriation of funds in many cases. The great and glorious ‘government audit’ detected only a few amongst the many cases of exaggerated expenditure, or of undue cost escalation and, as was only to be expected, a good part of the malfeasance was buried deep in notes and files, wrapped in all sorts of provisos and explanatory notes. Last, but not the least, was that the plan was formulated on its own considerations, and statutes governing economic activities such as the Companies Act, the Industries (Development and Regulations) Act, the import and export control regime, the capital controls regulations, the agriculture produce marketing rules, etc., went on in their own—and divergent—ways. Considering all this, Prasad sometimes wondered that an ICOR of 4.47 or 6.49 had at all been achieved in manufacture. As far as Prasad could understand, the ‘mixed economy’ (with the public sector concerned with certain important, essential or “strategic” industries, and the private sector for the rest of it) that Nehru had thought of, and which Mrs. Indira Gandhi during her tenure followed through, had at best yielded mixed results. The mixture under no circumstances—other than under a wholly totalitarian regime—could have been homogeneous. And the basic segregation between the public and

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private sector persisted, each working in its own limited sphere, by its own rules and compulsions, without the necessary convergence, or developing any significant degree of synergy. This basic contradiction, as Prasad realised, had taken some time—nearly 40 years—to resolve. Ever since 1985 when the old catchwords in the political jargon had diminished in their usage and effect, and old shibboleths had been set aside, new concepts and ideas were taking hold in a sizeable part of the economy, especially in services and manufacture which contributed about 70–75% of the country’s GDP, of core competence, innovation, enterprise, technology, etc. that provided new meaning and dimension to economic decision-making. Return on capital employed, and earnings per share or unit investment were the new bench-marks according to which many people, in government, services and in industry, now started to consider in assessing performance. More people were realizing that economic decisions were not risk-free, and the old practice of pointing the finger at government for every error of judgement, and expecting government to bail out for every such error, was no longer applicable. The succession of coalition governments since the late 1970s and again in the mid 1990s loosened the stern hold of the central government on economic policies and their implementation. This had the signal effect—as Prasad could see—on the state governments in trying to work out their own schemes of development with mega power projects, industrial estates or “special economic zones”, ports development and so on, according to their own endowment of resources of men, money, materials and markets. More people in decision-making were thinking up more new ideas to spur development in their own states. Of course this meant that increasingly the thinking and feeling of “every man for himself, and the devil take the hindmost” gained ground. But ‘peerpressure’ amongst the states saw to it that the development process was to an extent insulated from the hurly-burly of everyday politics. Whichever government came to power in the states, it felt increasingly obliged—so to speak—to maintain the tempo of economic development. Fortunately, under the federal structure, and the constitutional provisions, people could “vote with their feet” and move or migrate

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from wherever they felt inadequate or uncomfortable to a place that promised them more. This certainly gave rise to some degree of social tensions vis-à-vis the local inhabitants in some parts of the country, and the not-unexpected strains in urbanization; but it was nothing extraordinary or unmanageable. Increasingly, the fabled Indian enterprise and skills in manufacture and trading written of in the history books were once again unfolding and taking hold of the popular attention and imagination. The trade channels with Southeast Asia and the Middle East, mentioned in history books, and which had been clogged for centuries, now seemed to be shaking themselves free and getting re-generated. Indian science, with its long tradition in medicine and astronomy, surged forward in fields of medicine, pharmacology, bio-technology and in satellite development and launches for harnessing natural resources. Knowledge and language skills, and the base in logic—thanks to the ‘argumentative’ Indians—led to a massive upsurge in information and allied technologies that had been quite unimaginable in the 1970s and had possibly been just a gleam in the eyes of S. Narayana Murthy, Azim Premji and C. Ramadorai even in the first couple of years of the 1990s. The rise in the Sensex share index of the Bombay Stock Exchange from about 3000 in 2001–02 to over 12,000 by 2006 was not something to be shrugged at. In spite of the ups and downs and occasional corrections, the share index did reflect a fundamental change in the business and economic climate in India. As many Indian entrepreneurs were investing in assets abroad as overseas business was investing in India; in fact more Indian investment was going out than foreign or NRI investment was coming in, be it in oil fields, iron ore mines, steel, pharmaceuticals, manufacturing facilities, hotel chains and what have you. The best part, according to what Prasad believed, was that this progress —albeit delayed and slow—had been at a much lower social cost than had been achieved earlier in Soviet Russia and China. By 1990, Russia had gone the way of all flesh, and neither sweet words of glasnost nor the attractions of a perestroika could lure the Russian people back into the Soviet system. China, ever more watchful and circumspect, had

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abjured all talk of glasnost or liberalization, or perestroika or re-structuring, and went in its own way to develop a socialist market economy, where the retrenchment of 8 million workers from state-owned undertakings had not been allowed to raise a peep, and migration of rural workers—so free in India—had been closely regulated and monitored through ‘residence’ and ‘work’ permits, and scheme of bonuses and penalties, so that these workers thought little or nothing of working 10 to 12 hours at a stretch, usually without any payment for working beyond the regulation eight hours per day and 40 hours a week. But they could at least earn the USD 100 to 120 per month that was much above what they could have back in the villages. It was as good a system of capital accumulation—though of the sound, primitive type—as any. The growth in India, Prasad felt, was becoming more ‘people-driven’, with the road-side motor mechanic, or the auto-rickshaw driver, or the upcoming or established businessman in their own way, and according to their own light, trying harder, doing better. Increasingly, the print and electronic media sensed that something was afoot and began to focus on business moves and trends. More business magazines, more business supplements in the regular newspapers, and full-fledged business channels on TV started off in the last 10 years than had been seen—or indeed, been possible—in the first 40 years after Independence. No doubt these were read and seen by possibly about 100 or 150 million people living in the big cities or main towns, but their business and investment decisions touched the lives of many, many more millions. Even in small towns scattered all over the country, telephone kiosks and small cyber cafes had become the focus of daily activities, and information—whether about floods or drought, or dengue outbreak, or the opening of a new school or a road—was greedily collected and acted upon. New possibilities seemed to be opening up, and that was half the battle. The sloth and stagnation of the earlier years seemed light-years away, and a new spirit of hope, and the ability to get things done in spite of the persisting hurdles and hardship seemed to grip every other person. Prasad recalled his discussion in the early 1990s with his good friend, Bidyut Das, who ran a small workshop with two or three lathes, cutting and milling

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machines, power drills and so on, who had, in the aftermath of the initial steps towards liberalisation and globalisation, had gloomily predicted that his small business would go bankrupt under the onslaught of the multinational firms. Now, Das found himself unable sometimes to cope with the volume of business, especially from export orders that his clients were regularly picking up. In many cases, he was able to ask for, and get an advance against the orders booked. He had been able to renovate his house, add a couple of new machines, and buy a Maruti van to cart his produce and his family with equal ease. His problem now was to get the right quality of steel or aluminium material at the right time to complete the order. Of course, the price had always to be competitive, and the quality and delivery right, as otherwise the order would go to Thailand or Pakistan. It was all about comparative advantage written about in economic theory; but the advantage lay not only in material endowment, but as much in knowledge and skills, the ability to take risks, and sheer nimble-footedness in decision-making and execution. There was also Kausar Ali, the motor mechanic par excellence, who could re-condition a derelict Rolls Royce as much as he could tune up an aging Fiat car. He was now thinking of developing his plot of land near Barasat into a godown and a couple of shops. With the growing numbers of cars on the road, there were more to be repaired, overhauled or re-painted, and he had taken a second garage space and had replaced the tarpaulin roof with a new tiled one so that his team could work, come rain or shine. That was where their respective experience, knowledge and skills counted. But it was their own, individual skills and experiences, and that was their ‘unique selling proposition’ (USP)—and of no one else’s. It was the aggregation of their USP—and of millions of others like them in the field and factory—that ultimately led up to India’s own hopes for the future. But it was their own, individual skills and experiences, and that was their ‘unique selling proposition’ (USP)—and of no one else’s. It was the aggregation of their USP—and of millions of others like them in the field and factory—that ultimately led up to India’s own hopes for the future.

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When Prasad went to fetch the milk each morning, he saw the little children thronging to school, some private, some government-aided, with their parents, some of whom he recognized as rickshaw pullers, and some as house-maids, and he knew that change had come. People wanted more; they wanted to improve their lot in life; they had much more confidence than ever before. He rode on the Delhi Metro and liked it. He was quite startled to see a paanshop wallah or betel-leaf seller in an interior village in Orissa (one of the states that still had a lot of rural poverty) talk almost casually into his mobile phone. There was now a greater degree of hope, greater aspiration, greater faith in themselves amongst a lot more people. Suddenly, Prasad was reminded of the poem by Rabindranath Tagore: Nirjharer Swapnabhanga, roughly translated as ‘The Awakening of the Frozen Cascade’Aji ey prabhatey rabir kar kemoney pashilo praner par, kemoney poshilo guhar andharey prabhat pakhir gaan … Na jani keno rey eto din parey jagiya uthila pran. (The first rays of the morning sun have touched my heart; the chorus of bird calls now resounds in the dark depths of the cave … I know not why suddenly after so many years there is this stirring of life.)

Endnotes Aloo ka parantha Koi Kholshey Punti

: : : :

Tyalapia Anurodher Ashor Prabhat feri

: : :

Aloo kabli Cholbey na, cholbey na

: :

Ditey hobey, ditey hobey

:

Adda Moghlai paratha Chicken afghani Dhuti-panjabi Besan Suji Ashbo jabo, maine pabo; kaj korley overtime pabo

: : : : : : :

Potato pancake Climbing perch (Anabus testudineus) Dwarf gourami (Colisa lalia) A type of small fish which tastes best when fried (Cypriniformes) A type of fish (Oreochromis mossambicus) Radio programme March past on Republic or Independence Day Snack preparation made of potato Usually during some gherao or rally by any company union against company policy, people participating in the rally shout some slogans which mean that the company policy will not do! Again, the situation is the same but this time round they have some demands which have to be met Small get-togethers in the neighbourhood Egg and flour pancake Chicken dish Bengali attire Gram flour Semolina I will come and I will go and I will get salary. If I work I will get overtime

Bibliography 1. Arun Shourie, Governance, (Rupa & Co., 2004) 2. Ashoka Gupta, In the Path of Service, (Stree, 2005) 3. Barry M. Richman and Melvyn R. Copen, International Management and Economic Development, Tata McGraw Hill, 1972) 4. Bhabatosh Datta, Essays in Plan Economics, (The World Press, 1968) 5. Central Statistical Organisation website data 6. Dhires Bhattacharya, India’s Five Year Plans—An Economic Analysis, (Progressive Publishers, 1975) 7. Ditmar Rothermund, An Economic History of India, (Manohar Publications, 1988) 8. Dr. Vijay Kelkar, Committee Report on Indirect Taxes, 2002, Committee Report on Direct Taxes, 2003 9. Government of India, Central Civil Service (Conduct) Rules 10. Government of India, Fundamental Rules & Statutory Rules 11. Gurcharan Das, India Unbound, (Penguin, 2002) 12. Janardan Thakur, Prime Ministers—from Nehru to Vajpayee, (Eshwar Imprints, 1999) 13. Jean Dreze and Amartya Sen, India—Economic Development and Social Opportunity, (Oxford University Press, 1996) 14. Ministry of Finance – Annual Economic Surveys 15. Miscellaneous news items in The Statesman, Business Standard and Business Line (The Hindu) 16. Nitish Sengupta, Inside the Steel Frame, (Vikas Publishing, 1997) 17. P.N. Dhar, The Evolution of Economic Policy in India, (Oxford University Press, 2003) 18. P.N. Haksar, Reflections on Our Times, (Lancer Publications, 1982) 19. Planning Commission website and data

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20. Pranab Bardhan, The Political Economy of Development in India, (Oxford University Press, 1986) 21. Raja Chelliah, Committee Report on Tax Reforms, 1993, and The Malady of Continuing Fiscal Imbalances, The 4th Ambirajan Memorial lecture, February 2005 22. Renuka Ray, In Retrospect, (Stree, 2005) 23. S. Nihal Singh, Indira’s India, (Nachiketa Publications, 1978) 24. Sukhamoy Chakravarty, Development Planning—The Indian Experience, (Oxford University Press, 1987) 25. Sunil Sengupta and Haris Gazdar, in Indian Development, Jean Dreze and Amartya Sen, (Oxford University Press, 1996) 26. T.N. Srinivasan, Eight Lectures on India’s Economic Reforms, (Oxford University Press, 2000) 27. T.S.R. Subramanian, Journeys through Babudom and Netaland, (Rupa & Co., 2004) 28. Terence J. Byres (ed.), The Indian Economy—Major Debates since Independence, (Oxford University Press, 1999), Introductory article and — (a) Prabhat Patnaik, Some Indian Debates on Planning, (in Byres) (b) J. Mohan Rao and Servaas Storm, Distribution and Growth in Indian Agriculture, (in Byres) (c) Sudip Chaudhuri, Debates on Industrialisation, (in Byres) (d) Rathin Roy, Debates on Indian Fiscal Policy, (in Byres) 29. Vijay Joshi and I.M.D. Little, India—Macro-economics and Political Economy, 1964–1991, (Oxford University Press, 1994) 30. World Bank Country Study, India—Five Years of Stabilisation and Reforms, 1996 31. World Bank Development Report, Prospects of Growth and Alleviation of Poverty, 1978

Index

A Acquisitions 53, 150 Administered price mechanism 149 Advance licensing scheme 108 Agricultural Prices Commission 74 Allowances 30 B Balance of payments 26 Bankruptcy 132 Bidhan Chandra Roy 5, 10, 162 C Calcutta 3 Calcutta port 81 Canalisation 78 Capital 28 Capital investment 50 Capital issues control order 27 Capital market 148 Cash compensatory support 79 Cash reserve ratio 110 Central Civil Service (Conduct) Rules 126

Central Sales Tax Act of 1964 27 Chaudhary Charan Singh 72 Closures 68 Coal India Ltd 147, 148 Collieries 60 Commerce 28 Communications 85 Communist Party 48 Communist Party of India (Marxist) 47 Companies Act 1956 27 Compensation 118 Compulsory deposit scheme 62 Computerisation 86, 108 Congress Party’s Avadi Resolution 7 Connectivity 85 Constituencies 143 Constitution Amendment Bill 65 Consultancy firms 119 Containerised 81 Convertible debenture 82 Corporate tax 135 Cost of investment 59 Crude oil prices 155 Customs duty 34, 72

178 Index D Dearness allowance 34, 62 Debt-equity ratio 110 Deficit financing 63, 102 Depreciation 30 Devaluation 32 Development rebate 70 Directive principles of state policy 65 Directorate General of Supply and Disposals 41 Directorate General of Technical Development 69 Duty exemption pass book scheme 108 E East Pakistan 4, 56 Eastern economist 28 Economic and Political Weekly 28 Economic Times 28 Eleventh Finance Commission 131 Employment 55, 86, 125 Engineering industry 13 Equity market 82 Estate duty 73 Excise duty 26, 72 Exports 155 F Hernando De Soto Fertilizers 30

132

Fifth Pay Commission 122 Finance ministry 70 Financial Express 28 Financial Times 28 First Five Year Plan 8 Fiscal deficit 113 Fiscal Responsibility and Budget Management Act 143 Fisheries 75 Five Year Plan 8, 13, 23, 26, 27, 28, 42, 43, 44, 89, 102, 160, 161, 162, 165, 167 Food Corporation of India 74 Foreign exchange entitlements 32 Foreign Exchange Regulation Act of 1947 27 Foreign exchange reserves 135 Freight equalisation fund 8 Fundamental rights 65 G Gazettes 28 Global accounting standards 146 Go-slow 68 Gold Control Act 51 Goods and Services Tax 144 Gram panchayats 92 Green revolution 74 H High-yielding varieties 52 Highways 139 Hindustan Standard 28 Hoarding 36 Horticulture 75

Index 179

I Import licences 32 Import trade control regulations of 1948 27 Income tax 26 Income Tax Act 1961 27 Incremental capital-output ratio 165 Indira Gandhi 3 Industrial disputes act 66, 68 Industrial licensing 26, 49, 105 Industrial policy resolution 7 Industrial tribunal 68 Industries (development and regulation) act 1951 27 Infant mortality 77 Inferior goods 13 Inflation 4, 62 Infrastructure 26, 139 Insurance regulatory and development authority of 137 Internal emergency 63 International trade 110

Land holdings 7 Land reforms 75 Lay-offs 68 Liberalisation 118 Licensing controls 42 Life expectancy 77 Liquidity 156 Literacy 65 Literacy rates 78 Long term fiscal policy 97 M

Jagdish Bhagwati 82 Jawaharlal Nehru 2, 7, 8, 10, 162 Jayaprakash Narayan 62 Jute mills 13

Madhavrao Scindia 85 Managing agency 33, 38 Manmohan Singh 103, 105, 114, 141, 142, 147, 153, 156 Market borrowings 102 Marrakech agreement 109 Mergers 53 Ministry of industry 69 Misallocation 88 Mixed economy 7, 168 Modvat 99 Monopolies 31 Monopolies and Restrictive Trade Practices Act 53 Monopolies inquiry commission 31 Mr. M. Narasimhan 98

L

N

J

Labour 45 Labour bureau 34 Labour laws 26 Lal Bahadur Shastri 3

National rural employment guarantee 150 National rural employment guarantee programme 143

180 Index Nationalisation 51, 59 Non-Governmental Organisations 91 Non-resident indians 92 O Oil 101 Open general licence Over-invoicing 10

78, 107

P P. Chidambaram 107 P.C. Mahalanobis 8, 167 P.V. Narasimha Rao 103 Packaged commodities (Standards of Weights and Measure) 79 Padma Desai 82 Panchayati Raj 106 Pension 4, 55, 119, 132 Per capita GDP 126 Per capita GNP 133 Per capita state domestic product 133 Permanent settlement 7 Permit system 42 Perquisites 125 PL 480 3 Planning Commission 8, 71, 77, 142 Postal savings schemes 138 Poverty 65, 120 Poverty alleviation programmes 77 Poverty line 115, 120

Power tariff regulatory authority 137 Pre-shipment credit 108 Prime lending rate 156 Private consumption 134 Private enterprise 27 Private final consumption expenditure 134, 135 Private household sector 134 Private sector 28 Prof. Dhires Bhattacharyya 167 Provident fund 55, 119, 138 Public consumption 134 Public equity issues 139 Public investment 77, 166 Public Provident Fund 138 Public sector 26 Public sector undertakings 106 Q Queuing

78 R

R.C. Dutt Committee 50 R.K. Hazari Committee 50 Rabi crop 136 Railway Board 41 Raja Chelliah 144 Rajiv Gandhi 85, 96 Rate of exchange 58 Red book 27 Refugees 4 Regulations 132 Rent 87, 125 Rent-seeking 87

Index 181

Replenishment licences 79 Reserve Bank of India 103, 137 Reserve Bank’s bank rate 110 Revenue deficit 101 Revolutionary movement 47 Right to Information Act 151 Rupee 32 Rupee-rouble exchange 58 S Sales tax 26, 72 Sales turnover 50 Sam Pitroda 85 Sanjay 63 Securities and Exchange Board of India 137 Self-help groups 91 Service tax 107 Socialist 7 Soviet Russia 58 Special economic zones 144 Standard input-output norms 108 Statutes 27 Statutory liquidity ratio 110 Statutory rules and fundamental rules 126 Sterling balances 10 ‘Sterling’ companies 37 Stock market 82, 139 Stocks 36 Strikes 68 Subsidies 72, 74, 113, 125 Super profits tax 73

T Tariff regulatory authority 137 Tax deduction at source 107 Tax incentives 144 Technology 59, 84 Telecommunications 85 The Economist 28 Trading profits 35 U Udyog Bhavan 70 Under-invoicing 10 Under-utilisation 45 Unemployment 4 Union budget 71 Unit Trust of India 138 Urban land ceiling act 66 USA 58 V Vadilal Dagli 79, 82 Value Added Tax 144 Vijay Kelkar 144 Voluntary retirement 118 W Wealth tax 73 West Bengal 5 Work-to-rule 68, 69 Workers 45 World Bank 77 World Trade Organization

109

Author’s Profile

Prosenjit Das Gupta entered service as a secretarial officer in a leading chamber of commerce in Kolkata and served there for 24 years in different capacities, dealing with the day-to-day problems, as well as the longterm issues connected with the development of a number of industries and trades. In between he studied both general management and commercial law. He later joined a leading industrial association, working on similar issues, rising to the position of Executive Director. His work involved the close understanding, analysis and interpretation of government policies on one hand and, of the commercial and technical issues concerning an industry on the other. It required close interaction with government departments, public sector bodies, leaders of industry and, even labour leaders at one stage. He has visited a number of countries such as Japan, China, Taiwan, Germany, Soviet Russia, UK, and USA, as a member of technical or export delegations. Prosenjit Das Gupta was born in 1944 in a middle class Bengali family in Kolkata. He received his education at the St. Xavier’s Collegiate School and Presidency College, graduating with Honours in Economics in 1965. He has travelled widely in India and abroad. He has written a number of books, such as the 10 Walks in Calcutta, Walks in the Wild, Tracking Jim and After Elwin, which have been quite popular with readers. His interests are wildlife conservation and nature photography, folk culture and crafts, and of course, travelling. He is a bachelor and lives in Kolkata.