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25 years of reforms: How a PM with zero knowledge of economics scripted India's biggest

turnaround story

When Pamulaparti Venkata Narasimha Rao was born, a Sufi pir came up to his father’s door and
said, “Your son will be a badshah.” Vinay Sitapati mentions this possibly apocryphal story in his
new biography of Narasimha Rao, Half Lion. Yet, in the beginning of 1991, Rao could not bank
on any such premonition.

Rajiv Gandhi denied him a ticket for the general elections in May. The 69-year-old Rao knew
this was an unceremonious send-off into the political wilderness. He noted in his diary, writes
Sitapati who accessed 45 cartons of Rao’s papers, “26-4-91. At 3.00 PM today, a gap has
appeared in my legislative career for the first time in 34 years. I am feeling extremely dejected.”

Rao packed his bags and books for Hyderabad and “was about to close his bank accounts and
ready to accept the position as the head of a monastic order called Siddeswari Peetham in
Courtallam in Tamil Nadu,” says Sitapati.

Yet, 25 days after Rao made that bitter entry in his diary, everything changed in Indian politics:
Rajiv Gandhi was assassinated. His widow Sonia Gandhi, in mourning, refused to be Congress

The mantle fell on Rao, who eventually walked back from the margins of politics to the very
heart of it: 7 Race Course Road, New Delhi.

There was nothing in Rao’s political past that indicated that he would be a liberaliser. Manmohan
Singh, the brain behind the reforms as Rao’s finance minister, said as much to Sitapati: “I had no
inkling that Rao was in favour of liberalisation based on his past record.”

Rao was a socialist at heart. Sitapati points to his stint as Andhra Pradesh CM in the early 1970s
when he implemented land reforms. “When it came to the economy, Rao was a protectionist
until 1991,” says Sitapati.

He narrates an interesting incident in his book: “In 1990, when in the Opposition, Rao would
write to the commerce minister, Subramanian Swamy, complaining that the electrolytic
manganese metal from abroad was being allowed easy import into India under the ‘open general

Rao grumbled that this was hurting domestic producers. His complaint reflected economic
protectionism at its worst.”

Was this the man who could recognise the deep crisis the country was in? Jairam Ramesh, who
was OSD in Rao’s PMO during those transformative months in 1991, recalls his meeting with
Rao the day after he became Congress president.
“He told me that he was not an expert on economic issues and that I should coordinate meetings
with Pranab Mukherjee and keep briefing him on these subjects,” Ramesh recounts in his book
To The Brink and Back: India’s 1991 Story.

The man who confessed that he did not understand economics realised the magnitude of the
crisis in a couple of hours on June 19.

That was two days before he was sworn in as PM. Sitapati says: “He read a note given to him by
cabinet secretary Naresh Chandra on the economic crisis. It took just a few hours for Rao to
change his mind and become an economic liberaliser.

The stereotype of Rao as indecisive is incorrect. When he saw that the right policy was also
politically navigable, he could act speedily.”

Ramesh recalls in his book: “When he saw the note Narasimha Rao’s first response was: ‘Is the
economic situation that bad?’ To this, Chandra’s response was, ‘No, sir, it’s worse.’”

The contents of Chandra’s eight-page note were not new. Many of the reforms suggested were
part of what was dubbed as the controversial ‘M document’, prepared by Montek Singh
Ahluwalia for the VP Singh government.

Chandra’s note itself, Sitapati says, had been prepared by the line secretaries of the previous
Chandra Shekhar government: “It contained the core reforms that Rao and Manmohan Singh
would implement a few weeks later. It listed out devaluation, trade liberalisation, de-licensing

It took Rao’s political genius to instantly recognise their importance – and implement them.

Rao shrewdly realised that he needed a finance minister with immense credibility not just to
convince the detractors at home but also the doubters abroad.

Manmohan Singh, the erudite economist with irreproachable integrity, was to be the face of the

As Ramesh, who had a ringside view of the reforms being unleashed, says, there could not have
been a more unlikely duo playing harbingers of this fundamental change. “Both Rao and
Manmohan were pillars of the ancient régime, stalwarts of the very system they set out to

They were also by nature introverts, without mass base, rallying power or political coteries and
together they oozed charisma that would not fill a 10 ml bottle. In a matter of few weeks, they
would transform the country.
When Rao baulked, like with the devaluation of the rupee, Singh would steady him. “Right from
the beginning, the prospect of devaluation horrified the prime minister. It was not surprising,”
writes Ramesh.

“He belonged to a generation that believed that the 6 June 1966 devaluation forced upon Indira
Gandhi was a political and economic disaster. Little did he realise that almost exactly a quarter
of a century later, he would be in the hot seat. Of course, numerologically, 6.6.66 couldn’t be

It was a leap of faith for Rao. The first devaluation of the rupee of 7-9% against major currencies
took place on July 1. The second devaluation of about 11% happened on July 3.

It must have been a listless night for Rao, for early morning he called Singh to stall Step 2. But
by 9.30 am, when Singh made the call to RBI deputy governor C Rangarajan, the devaluation
had already been carried out.

Sitapati writes: “Embarrassed, Manmohan Singh offered to resign, saying, ‘Let the responsibility
lie with me.’ Rao had always intended his finance minister as a scapegoat, but he did not want to
sacrifice him just yet. ‘He backed me,’ says Manmohan Singh.”

It was a two-person financial tango. The devaluation decision, says Ramesh, was taken by the
prime minister and the finance minister – and conveyed to the RBI.

Manmohan Singh feared that, singed by the 1966 devaluation, the Cabinet would not have
allowed it.

The man who was condemned for Ayodhya deserves to be celebrated for transforming the
economy. “From patwari to prime minister, a long journey with no celebration at any stage.”

That was Rao writing about himself, with characteristic introspection and wry matter-of-factness,
in the prelude to The Insider.

It is time to make up for it, 25 years after the introverted prime minister opened up the economy
and began what he called the ‘mahaprasthana’, the Great Journey. Who else but Rao would
resort to Sanskrit to refer to a very modern phase of the nation?

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