October 13, 1999. Atal Bihari Vajpayee was sworn in as prime minister for the third time. Among the well-wishers was Nitin Gadkari, the ‘flyover minister’ who delivered India’s first expressway. Vajpayee asked Gadkari, half in jest, “Is there a flyover to connect Bharat with India?” Gadkari had connected 16,000 villages in Naxal-hit areas with roads and had no hesitation saying ‘yes we can’. Vajpayee set up the National Rural Road Development Committee with Gadkari as chief to design the Prime Minister’s rural roads programme. The PMGSY has since enabled over 5.5 lakh km of roads connecting Bharat.
The journey of Vajpayee’s ashes across India this week symbolises Vajpayeenomics. Connectivity was a theme song of Vajpayee. In politics it was connecting people with ideas, and in governance it was connecting people with access to services to prosper. The idea as a force multiplier for investments and employment was nurtured and propelled by Yashwant Sinha and Jaswant Singh.
The national highways programme connecting east with west and south with north connected people and markets for economic growth. Many would recall the `16 per minute mobile tariff days of 1998. Exorbitant costs detained telecom penetration and the licence fee regime had crippled telecom companies. Vajpayee enabled the migration of telecom companies from a high-licence fees regime to a revenue sharing model. By 2004, India was logging over 3 million subscribers per month.
The popular image of Vajpayee as a political colossus is rooted in and owes much to his comprehension of real-world economics. Many of the strategically significant reforms after 1991 were founded in the Vajpayee years—most critically, interventions to combat hunger and deprivation and promote human resource development.
The Antyodaya scheme providing 35 kg of food grains at `3 and `2 per kg for BPL families was launched by Vajpayee—and is the template for the National Food Security Act. The Kisan Card was introduced in 1998. The much-discussed Swaminathan Committee is an avatar of the National Commission for Farmers. It was set up by Vajpayee in 2003 to be led by Sompal Shastri for determining a formula for MSP and ensuring equitable returns to farmers. Agri policies—whether it was BT cotton or dairy development—were focused on raising farmer incomes.
Today, India has over 14 lakh schools—up from 8.6 lakh in 2001. The number of students enrolled in schools is over 19.7 crore— that is roughly the population of UK, France and Germany. The catalysts are the Sarva Shiksha Abhiyan launched in 2000-2001 and the 86th Amendment of the Constitution in December 2002, which legislated the right to education.
The macro fundamentals India is proud of—the consensus for a cap on government spending—rests on the FRBM Act passed in August 2003. The idea of GST was conceptualised as a ‘grand bargain’ with states’ by the task force on the implementation of FRBM Act led by Vijay Kelkar. FDI in insurance was first opened up in 1999—in fact the scope for opening sectors for FDI, and the steps announced subsequently to allow foreign equity in financial services, infrastructure, aviation and retail stem from the 2002 report of the N K Singh Committee.
The induction of the private sector in defence production was born in Vajpayee’s tenure. On June 18, 1998 George Fernandes interacted with corporates at a CII meeting. In May 2001, the government articulated the vision to open the defence sector for both, the Indian private sector and FDI. Vajpayee then tasked a committee led by Vijay Kelkar with defining the contours of engagement. Pranab Mukherjee as defence minister accepted the report in 2005, but thanks to the reigning saints in the UPA, implementation of the policy was stalled.
The need to get the government out of business has been a saleable slogan since the 1991 liberalisation. Vajpayee empowered Arun Shourie to get the sarkar out of ‘karobar’. Sixteen entities, including Balco, VSNL, IPCL, Hindustan Zinc Ltd., Modern Food, and hotels were privatized. The regimes which preceded the Vajpayee regime and those which followed chose expediency over efficiency.
No doubt there was resistance to privatisation and liberalisation. When VSNL was to be privatised, his ministers were up in arms, including many who are in the Cabinet now. Vajpayee smiled through the diatribe and ended the meeting with a simple ‘yeh karna hai (we must do it). Vajpayee was also aware of the limits of disruption. On a Thursday evening in September 2001, a multinational consultancy made a presentation for 10 per cent growth. At the end the wily Buddha smiled and only said ‘magar yeh sab hoga kaise’ (how will all this happen?).
Vajpayee came to power when Asian economies were reeling under the currency contagion, companies were struggling under debt, banks were laden with NPAs and state electricity boards were running on empty. In its six-year tenure, the regime enacted SARFESI to enable asset reconstruction companies, bailed out banks and UTI, funded SEBs and enacted the Electricity Act 2003, opening up the power sector. Team Vajpayee, particularly Yashwant Sinha and later Jaswant Singh, steered the economy through the contagion, past the Kargil war, through the Parakram border stand-off and US sanctions after Pokhran.
Vajpayee balanced pain and gain of reforms under a framework of reforms by consensus with a common sense perspective. He invested political capital for peace across the borders and to establish India as a nuclear power. He also invested capital for economic growth and positioned it as a goal for national security. The Atal model of development designed the building blocks for the $2.5 trillion economy and the India story.
Shankkar Aiyar
Author of Aadhaar: A Biometric History of India’s 12 Digit Revolution, and Accidental India
shankkar.aiyar@gmail.com