Who does not want to be a prime minister
At last, Manmohan Singh speaks his mind in an interview with
Sunday editor Vir Sanghvi
Manmohan Singh does not like giving interviews. Nor is he forthcoming
about his own feelings. It is hard to get him - even in private
conversation - to talk about his resignation in December 1992
or about his frustration in the last years of the Narasimha Rao
He agreed to give Sunday this interview soon after he stepped
down. But then, the date kept being pushed back, most recently
after the fuss over his TV interview to Karan Thapar in which
he was cornered into saying that he was not averse to any post
the party might offer him.
He asked then for us to wait for a month or so for fear that people
would think that he was giving too many interviews.
Finally, he fixed a date and agreed to give us what is his longest
and most significant print interview since stepping down as finance
He kept his word. Finally, he talks about the things that people
have always wanted to know; the scam, the failure of reforms to
continue after 1992, his resignation, the JPC, P Chidambaram's
performance as finance minister and yes, whether he wants to be
Let me start by taking you back over five years to the time
you were appointed finance minister. You had served the government
in a variety of senior posts but you were not a politician. What
made you agree to join the government and therefore politics?
At that particular time our country was passing through an
unprecedented crisis. And I believed that the crisis was also
an opportunity to be a part of a process that would turn around
I thought that this would be really exciting even though lots
of my friends advised me to turn it down. They said I was heading
for trouble, that I wouldn't last there for six months.
Of course, I was not new to the world of politics. I have dealt
with politicians ever since I came into the government in 1971.
I have seen many prime ministers, many finance ministers.
How were you informed of your inclusion in the Cabinet?
Dr P C Alexander sounded me out. I said I was willing to accept
the responsibility but frankly I did not think that anything would
come of the proposal.
At that time I was chairman of the University Grants Commission
and so I went to my office as usual.
Then I got a call from Mr Narasimha Rao who had just taken over
as prime minister. He said 'What are you doing there? Go home
and change. You have to be ready for the swearing-in.'
That's when it sunk in.
Looking back at those five years, what are you proudest of?
First of all, the balance of payments management of our government
would be, by any reckoning, a great success story.
We were able to turn around the economy in a very short space
of time without any loss of real output and so little social unrest
I said in my very first budget that we were concerned with stabilising
the economy but also with addressing the long-term problems of
low productivity and had a human face.
If you look around, I think ours was probably the smoothest turnaround
from a crisis to a situation of sustained growth of 6 to 6.5 per
cent in the last two years. Exports increased at an average rate
of 18 to 20 per cent annually. Industrial production when we left,
was increasing at an annual rate of 9 per cent. Even the Sensex
in June was 4000 (points). People were complaining about a credit
shortage and high interest rates but confidence was high.
To what extent was the reform programme undertaken at gunpoint
because of the IMF and the World Bank?
If you don't want IMF-World Bank money, you can do whatever
you like. At that particular stage we had to have the support
of international institutions even to stand. And these institutions
are not in the business of charity. They want their money to be
returned and therefore they impose conditions. The question was
whether the conditions. The question was whether the conditions
they were imposing on us were inconsistent with the long-term
interests of India.
The more I reflect on that, the more I am convinced what we did
was in the long-term interests of our country. But I always recognise
that India does not like discipline to be imposed upon it.
Even though they may be the right things, we don't like it if
they are seen to be imposed by foreigners. But in two years we
had terminated the IMF programmes. Thereafter we would be on our
Yes. And the reforms lost momentum and ground to a halt after
But that was not because we were on our own. The reforms stopped
because politics took over after December 6, 1992.
After that, it was just politics that was on everybody's minds.
And an important matter like cutting the fiscal deficit did not
receive as much importance as it should have.
At the end of 1993, we had elections in Rajasthan, Madhya Pradesh,
Uttar Pradesh, Himachal Pradesh and Politics took over. There
was not a single year when you did not have elections in Andhra
Pradesh or Maharashtra or some other state.
Therefore, short-term political considerations influenced the
running of the economy to a much greater extent than I would have
When you say 'politics took over' are you referring only to
the rise in government spending or do you mean that people thought
that reforms might be politically unpopular?
Well, cutting the fiscal deficit is not popular. That is the
experience of all governments in all countries. Expenditure cuts
hurt certain vested interests and they don't like it.
It requires a certain long-term vision and a strong cohesive government
to have the courage to persist. Unfortunately, we were not able
to do so.
But it was your government! You were a senior member of the
government. Didn't you protest?
I can't reveal what happened exactly in cabinet. Within the
limits of what I can say, I will tell you that I tried repeatedly
to make my point.
But what happened in the final analysis was a collective decision
and as a member of the cabinet I am as much to blame as anybody
Assume that reforms had not ended with Ayodhya. What would
you have like to see happen over the next three years?
I would have liked the fiscal deficit to be brought down to
about 4 per cent. We were highly successful in the first two years
but in 1993-94 the fiscal deficit went much beyond our expectations.
Then we brought it back to less than 6 per cent.
But speaking generally, I would have liked to have reduced the
fiscal deficit and got the fiscal system into good shape. We should
have pruned some subsidies and restructured the tax system.
I had great hopes of our financial sector reforms but they did
not turn out as well as I had expected because we were unable
to bring down the fiscal deficit.
If we had reduced the fiscal deficit to more manageable levels,
you would find bankers running after customers rather than the
present situation. Banks would have been under greater pressure
Could you explain that more fully for the benefit of the general
Yes, all right.
A fiscal deficit means that the government is not able to meet
its expenditure so it has to borrow money from the public. The
private sector also needs to borrow and therefore if there are
too many borrowers for a limited stock of money, interest rates
are bound to rise.
The other way is for the government to finance its deficit by
printing more money. If we had done that, there would have been
reckless inflation. So, if you can't control the fiscal deficit,
you have to choose between high interest rates or runaway inflation.
But you must all have seen this coming?
Of course, we did. But politicians need to get elected before
they can worry about becoming statesmen. (Laughs)
You've spoken about the unfinished agenda in terms of fiscal
responsibility. But what about privatisation? What about an exit
policy? Were these on the agenda?
They were on the agenda. But we faced the difficulty that
we had not raised a consensus in favour of reforms before we came
into office. Consequently, the Congress party itself was not sure
of where it stood.
Therefore we had to approach the subject of privatisation with
a degree of caution. In fact, I believe that we do not have a
consensus in this country even today to go the classical privatisation
route of selling off a state enterprise lock, stock and barrel.
We then evolved the idea of selling a part of the equity of a
state enterprise. Our purpose was twofold.
Firstly, we raised some money. But the more important purpose
was to introduce the discipline of the market in the management
of these companies.
We thought that if a part of their equity was held in the market
then they would be under a compulsion to pay attention to their
rates of return because they would have to justify their existence
to the marketplace.
Has it worked? Is the management of say, the State Bank of
India, more conscious of the company's rate of return because
of market compulsions?
Yes, I think they pay a lot more attention to their image
and to how their balance sheets look. I think it is a change for
What are your own views? Should we privatise property?
I gave my views in my Jawaharlal Nehru Memorial Lecture. It
is not that managers or workers in public sector enterprises are
inferior. But it is the culture. We have not found a way of balancing
the concern of public accountability and functioning autonomy.
There's too much interference. The culture of interference cannot
be stopped when people know that appointments are made by the
government, that all major investment is referred to the ministry.
The managers then try to anticipate what government would do rather
than to work on their own.
I don't think there is any real alternative. Power in our country
is now passing into the hands of groups who do not distinguish
between private interest and public interest. We have to go through
this process. And on balance, the power sharing caused by the
democratic process is good. But in the short run it also makes
it difficult to run any public enterprise.