Govts need to learn the art of 'listening' and 'consensus building'

Govts need to learn the art of 'listening' and 'consensus building'

Nilanjan Ghosh | 29 Oct 2015 03:16 PM
Jairam Ramesh’s recent book, “To the brink and back: India’s 1991 story”, is not a reiteration of the economic circumstances that prevailed during the 1991 reforms. It is a reinforcement of the political drivers and impediments in the ways of economic reforms. It is a story of two characters: PV Narsimha Rao and . More aptly, this volume could have been titled as “Two Horsemen of the New Apocalypse”, if viewed in a positive sense.  These two "horsemen", through policy decisions and consensus building, saved the economy from the "apocalypse". As such, the “brink” or the approaching “apocalypse” was quite visible in the Indian economy during 1991.


India’s balance of payments problems started in 1985. By the end of 1990, it was in a serious economic crisis: India’s foreign exchange reserves during June 1991 were barely sufficient to carry on essential imports for roughly 2 weeks. The economy was only weeks away from defaulting on its external debt payment obligations. It was during this phase that P. V. Narsimha Rao took over as Prime Minister in June, and roped in Manmohan Singh as Finance Minister.



The immediate response was to secure an emergency loan of $2.2 billion from the International Monetary Fund by pledging 67 tons of India's gold reserves as collateral.  The phase that followed was that of large-scale reforms in various domains of the economy, -- a process also known as structural adjustment. National sentiments were outraged and there was public outcry when it was learned that the government had pledged the country's gold reserves against the loan. Dissenting voices emerged not only from those outside the government and the leftist ideologues, but also from within the Congress party and the government, a component of which remained unconvinced with these moves. The challenge was bigger because it was a minority government.


Therefore, an immediate important endeavour in the priority list was the process of engagement with various stakeholders. Prime Minister Rao's speech a week after he took office highlighted the necessity for reforms. New York Times reported, "Mr. Rao … has already sent a signal to the nation—as well as the I.M.F.—that India faced no "soft options" and must open the door to foreign investment, reduce red tape that often cripples initiative and streamline industrial policy…”


The question is: How good was Manmohan Singh as the FM? It has often been stated among many economist groups that anybody else would have done the same thing as had been done by Singh. It is easy to say make such ex-post statements after a move proves positive. This volume by Ramesh responds to this position in two ways. Firstly, it reveals that Singh was the best choice given his experience in handling multilaterals, and his vast knowledge of international macro-economics. Secondly, if the drastic steps taken by him were natural and logical reactions, then why did he have to face so much opposition even from other economist groups (especially the so-called “brilliant” leftist economists and thinkers)?


More importantly, Singh took fast decisions. His decisions were not only backed by Rao in public space, but Rao provided sound arguments too. Interestingly, this book reveals how deeply the government was motivated with what the academia and think-tanks felt. While a joint statement of economists like PN Dhar and others were lauded, the importance of the KN Raj’s positive interview helped him immensely.


This book changes perceptions that government is fraught with red-tape and things do not move fast. The situation was much in contrast! Rather, it is clear that at the top, during the phases of crisis, the economy managers moved with the amazing speed of professionals to take care of the situation.


This brings me to the pressure points emerging for the PM and FM of a federal democratic Republic. Pressures emerge from various contending interest groups. Policy making can never be a Pareto improving game in a democracy. The situation is not like China, with a single party “controlling the market”! It requires a lot of resolve to take hard decisions, which the captains of the economy took in 1991. But, one thing that is obvious from the personality of the “unsung hero” of reforms, Rao, was that he had an inimitable capacity to listen to all the contending and contesting views. There lay a critical aspect of the democratic polity.


The most important aspect of change is building a large constituency to take up the ownership of the change. An important and integral component of the foundation stone of the Indian economic reforms of 1991 essentially lay in conciliation and consensus building. As I perceive it, it is not merely the process of change that requires consensus, but it is the process of governance and polity that rests on the principles of conciliation and consensus building.


By reading this volume, two thoughts come immediately. The first is: How could such a dynamic FM turn out to be a taciturn and muted PM later on? Does this mean that a specialist, successfully conducting a specialized job, cannot be generalist? Or shall we assume that 1991 dynamism prevailed because the erstwhile minority government was out of the clutches of the traditional sycophancy of the family-run regimes generally characterising Congress or associated governments? Probably, Singh needed a Rao to flourish. The second is: why couldn’t subsequent governments, including the present one, learn the lesson of “listening”, conciliation, and consensus-building? Bigger and better changes can be brought about through this.

The writer is Senior Fellow at Observer Research Foundation, Kolkata, and Senior Economic Advisor at WWF-India. Views are personal.

(The author can be reached at

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