Backstage
Insider memoir by the architect of much of the reform programme.
Summary
Ahluwalia held senior positions in Indian economic policy for four decades, including as commerce secretary, finance secretary, member of the Planning Commission and eventually its deputy chairman, and wrote this memoir of the reform period.
The substantive content covers the 1991 crisis and the reforms that followed. India faced a balance of payments crisis with reserves covering weeks of imports, and Ahluwalia describes the internal preparation, including the memorandum he had circulated in 1990 setting out a reform agenda before there was political appetite for it. He then covers the specific measures: the abolition of industrial licensing, which removed the requirement that firms obtain permission to produce, expand or change product; the reduction of tariffs from extremely high levels; the devaluation; the opening to foreign investment; the dismantling of import licensing; and the financial sector reforms.
He is candid about what was not done. Labour law reform did not happen. Agricultural markets were not liberalised. Public sector enterprise privatisation was limited. The power sector reforms did not resolve the distribution companies' losses. Land acquisition remained unresolved. He attributes these to coalition politics and to the absence of a constituency for reforms whose benefits are diffuse and whose costs are concentrated.
The later chapters cover the 2004 to 2014 period under the government he served, including the growth acceleration, the social programmes, and the policy paralysis and corruption allegations of the second term.
The book is an insider's account by a participant defending decisions he was part of. It is more candid than most such memoirs about failures, but the framing is his. Readers wanting critical assessment of Indian reform should supplement it.
Key takeaways 7
- India's 1991 reforms were prepared inside the bureaucracy before the crisis created the political opportunity to implement them.
- Abolishing industrial licensing removed the requirement that firms obtain permission to produce or expand, which was the central constraint.
- A balance of payments crisis provided the political cover for reforms that had been argued for without effect for years.
- Labour law, agricultural markets and land acquisition were not reformed, and these omissions constrained subsequent growth.
- Reforms whose benefits are diffuse and whose costs are concentrated have no political constituency, which explains what was left undone.
- Coalition politics made comprehensive reform impossible and produced a sequence of partial measures instead.
- Power sector distribution losses remained unresolved through successive reform attempts across decades.
Who should read it
Investors and operators in India who want a senior policymaker's account of what was reformed, what was not, and why.
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