Learning From Others: Taking Cues from India’s Economic Revival for Pakistan
Key Highlights :
Pakistan is in dire need of an economic revival and is looking to countries like the USA, UK and other European countries for advice and plans. But why not take cues from our next-door neighbour, India, who has seen a remarkable transformation of their economy in the last three decades? In this article, we analyse the speech that the then finance minister, Dr Manmohan Singh, delivered while presenting his country’s Budget in Lok Sabha on July 24, 1991 for fiscal year 1991-92 and how it changed the course of the Indian economy irrevocably.
Humility, Commitment and Confidence
At the outset, the concluding paragraph of Dr Singh’s speech is reproduced below to reflect his personal commitment:
“I was born in a poor family in a chronically drought prone village which is now part of Pakistan. University scholarships and grants made it possible for me to go to college in India as well as in England. This country has honoured me by appointing me to some of the most important public offices of our sovereign Republic. This is a debt which I can never be able to fully repay. The best I can do is to pledge myself to serve our country with utmost sincerity and dedication. This I promise to the House. A Finance Minister has to be hard headed. This I shall endeavour to be. I shall be firm when it comes to defending the interests of this nation. But I promise that in dealing with the people of India I shall be soft hearted. I shall not in any way renege on our nation’s firm and irrevocable commitment to the pursuit of equity and social justice. I shall never forget that ultimately all economic processes are meant to serve the interests of our people. It is only through a commitment to social justice and the pursuit of excellence that we can mobilise the collective will of our people for development, to give it a high moral purpose and to keep alive the spirit of national solidarity. The massive social and economic reforms needed to remove the scourge of poverty, ignorance and disease can succeed only if backed by a spirit of high idealism, self-sacrifice and dedication.”
Then at the end of the speech he tried to instill among people much-needed hope during a period of profound despair. His optimism stemmed from the line of actions the government had decided to take itself; it was not due to any commitments of loans from the foreign countries or lenders. He stated:
“Sir, I do not minimise the difficulties that lie ahead on the long and arduous journey on which we have embarked. But as Victor Hugo once said, “no power on earth can stop an idea whose time has come.” I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now wide awake. We shall prevail. We shall overcome.”
Results of Reforms
On thirtieth anniversary of the reforms in 2021, Dr Singh, the former prime minister, who as finance minister in 1991 led the reforms under the then prime minister Narasimha Rao, said: “India has grown to be a US Dollar 3 trillion economy and lifted nearly 300 million Indians out of poverty in the last three decades”. Then he spoke about the economic liberalisation policies of 1991 and said that those reforms “paved a new path for our nation’s economic policy”.
Description of State of the Economy
In the first part, explaining the state of economy of India in 1991, he had stated:
“The balance of payments situation is precarious. …However, due to the combined impact of political instability witnessed thereafter, the accentuation of fiscal imbalances and the Gulf crisis, there was a great weakening of international confidence. There has been a sharp decline in capital inflows through commercial borrowing and non-resident deposits. As a result, despite large borrowings from the International Monetary Fund in July 1990 and January 1991, there was a sharp reduction in our foreign exchange reserves. Due to the combination of unfavourable internal and external factors, the inflationary pressures on the price level have increased very substantially. We have not experienced anything similar in the history of independent India.”
In 2023, Pakistan is facing an identical situation. The first cause identified was political instability. In those days, India had been witnessing very weak successive coalition governments. Today we are facing a similar situation, so to speak. We have current and fiscal account deficits and there is erosion of trust of Pakistanis at home and abroad in the state of country’s economy and its viability. This means that whatever Pakistan is facing nowadays is not unusual at all.
The Reasons for Crises
The reasons were then explained as:
“The origins of the problem are directly traceable to large and persistent macroeconomic imbalances and the low productivity of investment, in particular the poor rates of returns on past investments. There has been an unsustainable increase in Government expenditure. Budgetary subsidies, with questionable social and economic impact, have been allowed to grow to an alarming extent. The tax system still has many loopholes. It lacks transparency so that it is not easy to assess the social and economic impact of various concessions built into its structure. The public sector has not been managed in a manner so as to generate large investible surpluses. The excessive and often indiscriminate protection provided to industry has ”
Conclusion
It is clear that the Indian economy had the same issues in 1991 that Pakistan is facing today. India’s economic revival was a result of the commitment, dedication and humility of Dr Manmohan Singh,
