The Accidental Prime Minister: The Making and Unmaking of Manmohan Singh (26 page)

One ‘populist’ initiative for which Dr Singh was happy to take credit was the farm loan waiver of 2008. Finance Minister Chidambaram had in his budget speech of February 2008 announced a plan to write off loans taken by small and marginal farmers across the country. A great deal of thinking and homework had gone into that announcement. All through 2007 and the early part of 2008, Dr Singh had wrestled with the issue. He understood only too well that the Congress party had come to power on the back of farmers’ distress. Several measures had already been taken to provide support to cotton farmers in Andhra Pradesh and Maharashtra, states that had seen a distressingly large number of suicides by farmers. The farmers who had committed suicide were, for the most part, not the most impoverished, or the landless. They were landowning farmers who had been crushed by debt. On the other hand, mainstream economists have always viewed loan waivers as fraught with moral hazard. Periodic waivers encourage debtors to default on payments in the hope that such defaults are regularized.

However, Dr Singh was not just an academic economist. His understanding of Indian farm economics was profoundly shaped both by the historical experience of Punjab, by the macroeconomics of Keynes and Keynesians in India, such as K.N. Raj and his own involvement in policymaking through the Green Revolution years of the 1970s. It was about Punjab that Malcolm Darling, a distinguished British civil servant in the undivided Punjab of British India, had said, in 1925, on the eve of a period of great distress in Indian agriculture: ‘The Indian peasant is born in debt, lives in debt and dies in debt.’

One evening in late 2007 after sitting through a long inconclusive discussion on the subject of loan waivers with senior officials and ministers, Dr Singh walked back to his private working space at 7 RCR. There, in that quiet corner, looking out into the patch of green where a peacock or two would always be walking around, pecking at food, he sat and gave me a long lecture on the history of loan waivers in India. It was the British, he explained, who first understood the nature of rural indebtedness and the importance of keeping the farmer alive. Rural credit, he recalled K.N. Raj telling him, is a ‘public good’. Economists define a ‘public good’ as any good or service that, once provided, does not discriminate between beneficiaries and non-beneficiaries. A street light is a common example of a public good. Government spends money on street lighting and everyone who uses the street, irrespective of whether she is a taxpayer or not, a citizen or a visitor, benefits from it. A loan waived by a bank may appear to be a private good since the primary beneficiary is the debtor. However, in keeping farmers alive, in sustaining the livelihood of farmers and in ensuring rural social stability, a loan waiver in the case of an impoverished and highly indebted farmer would have wider social benefits. Many countries, including developed market economies, justified farm subsidies on such social grounds. A debt waiver was a subsidy, and a public good.

Dr Singh recalled how every thirty years or so there had been a farm loan waiver in India and the last one had been sanctioned by Charan Singh in 1979. The cycle of mounting debts and accumulating farmers’ grievances would end with an across-the-board loan waiver. By 2007, he felt, the time had come for another loan waiver.

The policy debate within government went on for several months after that. It was possible that the party was not just mulling the decision, but had also decided to wait for the right political time. In Dr Singh’s mind, though, it seemed to me that afternoon, the decision had already been taken. He understood the political significance of a farm loan waiver, he had respectable policy precedents and an acceptable theoretical justification for what would be criticized by many as a populist measure. Above all, four years of high economic growth had generated the optimistic view that the country could afford to splurge on such schemes.

After several months of deliberation and after taking stock of the views of an expert committee chaired by economist R. Radhakrishna, Dr Singh approved the loan waiver scheme. Chidambaram unveiled the scheme through his budget speech in February 2008, including under it all agricultural loans disbursed by scheduled commercial banks, regional rural banks and cooperative credit institutions up to 31 March 2007 and overdue as on 31 December 2007, with the benefit to small and marginal farmers, those with holdings up to 2 hectares, being larger than for other farmers. The scheme would benefit 4 crore, that is, 40 million, farmers and would cost the government about Rs 72,000 crore, that is Rs 720 billion.

Despite the high cost, Dr Singh viewed the farm loan waiver as ‘his’ contribution to ‘inclusive growth’. It was set apart in his mind from the ‘flagship’ schemes for which his party gave all the credit to Sonia Gandhi, the NAC and the NCMP. Still lurking within the Oxbridge economist was a bit of the Punjab farmer, and he knew that this initiative would resonate well in rural India. After Chidambaram’s budget presentation, Dr Singh took ownership of the initiative through a fervent reply to the debate on the motion of thanks to the President, in March 2008, and recited from memory Oliver Goldsmith’s lines from
The
Deserted
Village,
‘Ill fares the land, to hastening ill a prey, / Where wealth accumulates, and men decay; / Princes and Lords may flourish, or may fade; / But a bold peasantry, their country’s pride; / When once destroyed can never be supplied.’

In 2008, at the end of five years of unprecedented 8 to 9 per cent economic growth, with the economy and government revenues buoyant, such expenditure was seen as affordable, despite the reservations of bankers and professional economists. There was growing concern that the government was committing itself to too many new subsidies and fiscal giveaways. Even the rural employment programme was not explicitly tied to the creation of assets and an income stream that would help pay for the programme on a sustainable basis. Even though he was enthusiastic about the loan waiver, Dr Singh recognized there would be a fiscal price to pay. But his eyes, as indeed of the entire UPA leadership, were now on the next election, not on the government’s fiscal bottom line.

The loan waiver came on the back of a massive investment in rural infrastructure and development through the Bharat Nirman, NREGA and other programmes. It was also coupled with steep increases in the statutory minimum price paid for rice and wheat. Taken together, this was the New Deal for Rural India that Dr Singh had promised in his 2004 Independence Day speech. It now remained for the Congress party to derive the electoral benefits of these initiatives, and the party did so in the summer of 2009.

 

 

While rural development and the farm economy was a priority imposed by larger social, economic and political considerations, the subject closest to Dr Singh’s heart was education. It was, therefore, particularly unfortunate that the human resources development (HRD) portfolio went to a political adversary who neither shared Dr Singh’s interest in education nor his liberal values. Arjun Singh was given the HRD portfolio because, for some reason, that came to be seen as the most important ministry politically, below Raisina Hill.

Senior politicians left out of Raisina Hill, home to the ministries of defence, finance, home and external affairs, were traditionally accommodated in the ministries of agriculture, railways and education. Rajiv Gandhi elevated the importance of the education ministry by combining all aspects of education—primary, secondary and tertiary— into one super-HRD ministry. Narasimha Rao, Rajiv’s first HRD minister, had a genuine interest in the subject, having started his political career as a minister for education in Andhra Pradesh. But some of Rao’s successors used the ministry for their own ends, especially the BJP’s senior leader Murali Manohar Joshi, who used it to push his Hindutva agenda, and Arjun Singh, who took upon himself the task of not just ‘cleansing’ the ministry and its vast bureaucratic empire of Joshi’s RSS legacy but also of promoting left-wing academics and causes.

In his own inclinations, Arjun Singh was no leftist. His political career, so far, had not reflected any such ideological leanings. He had worked his way up the political food chain in Madhya Pradesh politics, becoming the state’s chief minister. Leaving behind a string of allegations of corruption and the mismanagement of the 1984 Bhopal gas leak tragedy, he moved to Delhi and positioned himself as a rebel, opposing Narasimha Rao’s economic policies and ingratiating himself to representatives of the Muslim community by demanding Rao’s resignation over the handling of the Babri Masjid demolition in 1992. This was a political ploy—his secularism was as deep as that of the average Congressman. With respect to Dr Singh, too, Arjun Singh’s game was no different from that of the prime minister’s other political rivals, namely to appear more pro-Left than the PM in the hope of ousting Dr Singh with Left support.

While political analysts in the media focused more attention on Pranab Mukherjee’s desire to be PM, his links with the Left and his political moves, Arjun Singh was far more active than Pranab ever was in seeking to undermine the PM. Among the four senior ministers in the Union Cabinet (the other two were Natwar Singh and A.K. Antony), Arjun Singh took the longest time to adjust to Dr Singh’s elevation.

Arjun Singh used his perch at the HRD ministry to reinforce his image as a ‘left-wing secular’ politician, favouring and funding scholars and activities that helped him project this image. Whenever a journalist asked Dr Singh what he thought of Arjun Singh’s political games at the HRD ministry, the PM’s stock reply would be that India needed an educational system that promoted excellence and merit rather than any particular ideology. By favouring pro-Left and Muslim academics in various ways, he created a constituency of support among those who tended to be critical of the PM for following a foreign policy aimed, as they saw it, at ‘cosying up’ to the US—a country at odds with the Muslim world. Such was the sycophancy he encouraged that the Jamia Millia University even named a street on its campus after Arjun Singh when he was still in office.

Understandably, Dr Singh remained wary of Arjun Singh and took a long time to focus his energies on education even though the subject was so close to his heart. On the eve of a Cabinet reshuffle in 2006, he seriously considered moving Arjun Singh out. I reported what Narasimha Rao had said to me when I had once suggested the idea of sacking Arjun Singh to him. Rao had recalled the American President Lyndon Johnson’s response when asked why he did not sack his FBI chief, J. Edgar Hoover, even though the latter was known to spy on the President and his colleagues. Johnson’s frank response to the question had been: ‘It’s better to have him inside the tent pissing out, than outside the tent pissing in.’

Dr Singh chuckled and Arjun Singh stayed on.

More than a year into my tenure I had my own little encounter with Arjun Singh’s mind games. One day he saw me in the corridor as he came out of a meeting with Dr Singh in the PMO, and stopped and smiled. I greeted him with a namaste.

‘You should come and see me sometime,’ he said.

I told Dr Singh what had happened and he suggested, with a smile, that I should go call on the minister. The next day I landed up at his office in Shastri Bhavan. He ordered a cup of tea, sat back in his chair and said nothing. I didn’t know what to say or do, so I broke the silence with small talk. Since the meeting was going nowhere, I thought I should use the opportunity to draw the minister’s attention to an important policy issue. The Singapore government had invited India to locate a campus of the IIM, India’s premier network of management institutions, in that country, but the HRD ministry was opposed to the idea. The management guru Rama Bijapurkar had briefed me on the issue and I was not clear why the ministry was opposed to the idea.

Arjun Singh explained to me that the IIMs were prestigious Indian institutions and if students from Singapore or elsewhere wanted to study at an IIM they should come to India. Why should the IIM go to Singapore, he asked. I saw his point but offered the counterargument that locating an IIM in Singapore would only enhance the institution’s brand name rather than divert students away from it. I explained to him the concept of ‘brand’ and ‘branding’. I also pointed out that the demand for places at IIMs was far in excess of the availability, so the IIMs would never have to face the prospect of empty seats. Moreover, there might be many Indian-origin management gurus in the US and elsewhere willing to move to Singapore and teach there, rather than move to India.

Arjun Singh heard me out with a bored and disinterested expression. I decided it was time to go. I returned to South Block and briefed the PM about my meeting. He heard me, without comment, and went back to his work.

Two days later, my attention was drawn to a news report in an English daily published from Madhya Pradesh, with the headline, ‘PM Reaches Out to Arjun Singh’.

The report alleged that I had been sent as an ‘emissary’ by Dr Singh to reach out to him and seek his support, and the assurance of his confidence in the leadership of the PM. It said Dr Singh wanted to make sure that Arjun Singh was on his side. The report added that Arjun Singh had conveyed to the PM through his media adviser that news reports suggesting the HRD minister had policy differences with the PM were untrue, and had assured him of his support.