Reforms under Rao were ‘by stealth', not gradualism: Montek Singh Ahluwalia

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However, he distinguished between two types of gradual change — what he called 'gradualism' and 'reform by stealth.' 'I don't know if I coined the phrase, 'reform by stealth', but I certainly used it — and probably earlier than most. I used it to describe Rao's approach to bringing about reforms. Manmohan Singh was the architect, he actually knew what to do.
Speaking here on Tuesday at the launch of author David C Engerman's 'Apostles of Development: Six Economists and the World They Made,' Ahluwalia placed both Rao and Manmohan in the category of 'gradualists' – as he did himself.
New Delhi, Jun 11 (PTI) Former planning commission deputy chairman Montek Singh Ahluwalia has said that the 1991 economic reforms under former prime minister PV Narasimha Rao were characterised more 'by stealth' than by a clearly signalled gradualist approach, noting that neither Rao nor then finance minister Manmohan Singh were proponents of 'big-bang' changes.
'But, as he himself often said, he couldn't have done it without the prime minister's support. Neither Rao nor Manmohan Singh was a great believer in big-bang reforms. They were both, in that sense, gradualists,' said Ahluwalia.
The 81-year-old economist, who was a key member of the team that implemented the 1991 reforms, used an analogy from the shipping industry to explain his point.
'One of my friends who was in shipping once said: the turning circle of a small boat is much smaller than a big liner. You have to accept that if you're steering a very large vessel, it's going to take time to turn.
'In India, 'reform by stealth' really meant we are going to change direction, but we're not going to openly say so,' he said, adding that this often meant reform announcements were made without clear timelines or commitments, in contrast to a more predictable and planned path.
Ahluwalia explained that under a genuine gradualist approach, policymakers would communicate the trajectory clearly — for example, announcing a phased reduction of tariffs over a 10-year horizon.
This, he said, enables businesses and stakeholders to plan accordingly. However, he claimed, the approach that India took was different from gradualism and was 'opportunistic.' 'Our approach was: our duties are too high, we are reducing them, and we must do more. But you do not tell them how much more, or when you'll get to what — and that was really an opportunistic approach… I call that 'reform by stealth' you are going to reform, but you're going to do it when you can, and that's different from my view of gradualism,' he added.
During the discussion, which also had former ambassador Shivshankar Menon as one of the panellists, Ahluwalia also emphasised the need for greater awareness of the economic challenges faced by neighbouring countries like Pakistan, Sri Lanka, and Bangladesh.
Ahluwalia, who claimed that we are quite aware of what's happening in other developing regions — Africa, Latin America and East Asia –, lamented the lack of consistent media coverage or public discourse in India about 'what's happening next door.' 'You would think most people in India would be very aware of the economic problems of Pakistan, or why Bangladesh has faced repeated IMF interventions. But apart from reporting on an IMF programme — which many journalists seem to reflexively consider newsworthy — there is little coverage of what's happening in Sri Lanka, Pakistan, Bangladesh, or Myanmar,' he said.
Ahluwalia highlighted that while India has also faced economic challenges in the past, particularly in 1980 and again during the 1991 balance of payments crisis, it has not had to seek IMF assistance since.
'I recall in the 1991 crisis, we told the IMF in 1993, 'Thank you, the crisis is over.' As we walked out, we were saying it's really good not to be under IMF supervision. One of my colleagues said, 'Don't worry, you'll be back in 10 years,' and I replied, 'I'll take a bet with you.' The truth is, from 1991 to now, we haven't had to go back,' he said.
He credited successive governments for maintaining prudent economic management and stressed that India's relatively stable record stands in contrast to its neighbours, who have had to repeatedly turn to the IMF.
'The best way of learning why we didn't have to go back is to find out why others did,' he added.
'Apostles of Development,' published by Penguin Random House India, uncovers the pivotal role six economists — Amartya Sen, Manmohan Singh, Mahbub ul Haq, Jagdish Bhagwati, Rehman Sobhan, and Lal Jayawardena — played in shaping global poverty solutions after the Second World War. PTI MG MG VN VN
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