India's reformer who never was
The country is slowing as Manmohan Singh's government refuses to unshackle business

Pete Souza/White House

President Barack Obama and Secretary of State Hillary Clinton talk with Prime Minister Singh of India in the Cross Hall of the White House on Nov. 24, 2009.

Article Highlights

  • With GDP growth in #India slowing, it's time to reassess the prime minister's record

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  • Nearly eight years after taking office, Manmohan Singh has little to show for it

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  • India's reform agenda has become something of a joke

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When Manmohan Singh was sworn in as India's 13th prime minister in 2004, few would have guessed that the country's highest political office would end up diminishing a leader widely admired at home and abroad. But today with GDP growth slowing, the rupee softening and the stock market in a funk, it's time to reassess the prime minister's record.

Nearly eight years after taking office, Mr. Singh has little to show for it. Instead of using his position as a bully pulpit for reform, the 79-year-old presides over a government synonymous with policy paralysis and reckless populism. Its best known ideas include an unwieldy make-work scheme that distorts labor markets and breeds corruption, a misguided education policy that threatens to drown India's few excellent private schools in a sea of mediocrity and an ill-conceived food security bill proposal that will funnel subsidized grain toward the majority of the country's 1.2 billion citizens.

India's reform agenda has become something of a joke. Instead of stepping up privatization, Mr. Singh's government lavishes taxpayer rupees on bloated state-owned companies such as the national carrier, Air India. Regressive labor laws that make it difficult for businesses to hire and fire workers stall the progress of millions from farm to factory. A forest of red tape places India a lowly 132nd on the World Bank's annual Ease of Doing Business rankings, between the Palestinian Territories and Nigeria.

Yet if we remember, most people expected Mr. Singh to cut through this red tape and unshackle the private sector. For many Indians, Mr. Singh, a soft-spoken economist with a reputation for probity, stood apart from the assorted ruffians and rabble rousers who make up the bulk of the political class. Overseas, he was best known as the face of India's economic reforms, the Oxford-educated finance minister who in 1991 boldly freed Asia's third-largest economy from the License Raj.

In hindsight, the prime minister ought to have been seen all along as less of a reformer and more of a faceless technocrat. Yes, as the finance minister who kicked off reforms in 1991, Mr. Singh scrapped industrial licensing, slashed import duties and made room for the private sector in businesses once reserved for government. But he did so in the face of a severe foreign-exchange crisis and under a prime minister, P. V. Narasimha Rao, who saw how the socialist pieties of his Congress Party had kept India poor.

Before becoming finance minister, Mr. Singh actually showed little promise as a reformer. He had spent much of the previous two decades—as chief economic advisor to the government, head of the Soviet-style Planning Commission and governor of the Reserve Bank of India, among other positions—propping up the very socialist edifice he later sought to dismantle.

If observers had taken a close look at the nature of this long career, they would have had more realistic expectations. They should have seen that in 1991, Mr. Singh pushed reforms because his boss told him to. Put simply, his programs reflect his boss's priorities and always have.

So since 2004, the prime minister has done what he usually does: take cues from his current boss. Congress Party President Sonia Gandhi has been preoccupied with a series of grandiose welfare schemes similar in inspiration, if not always in detail, to those associated with her late mother-in-law, former Prime Minister Indira Gandhi. With neither a crisis nor a relatively reformist boss giving him cover for the few right instincts he may himself have, Mr. Singh championed the Congress mantra of "inclusive growth," meaning redistribution.

As long as India's economy was humming along near double-digit growth rates, Mr. Singh's image as a reformer remained largely unquestioned. In the international community, where India is widely touted as an economic rival to China, he has effectively been given a free pass. At G-20 meetings he's viewed as some sort of economic sage—confusing his personality for his policy.

The Congress-led coalition rode to power in 2004 on an implicitly antireform platform. Immediately after he took office, Mr. Singh decided to dismantle the separate ministry for privatization the previous government had created and shortly thereafter launched the rural jobs scheme. Even at that point, if people had paid less attention to the prime minister's resume as an economist and finance minister and more to his government's programs, a different picture would have emerged.

Only now that the good times are over are people waking up to the damage the Congress-led coalition has done. Last month, Goldman Sachs's Jim O'Neill, best known for inventing the term BRIC for the world's largest developing economies, said India's performance was the most disappointing of the four countries in the grouping. Against the backdrop of Europe's troubles, Stephen Roach of Morgan Stanley Asia says India's economy is at greater risk of a hard landing than China's.

Mr. Singh has his work cut out for him. Either he begins finally to deliver on reforms or he gets used to the idea that history will remember him not as someone who rescued India's economy, but as the leader who prevented it from attaining its full potential. A large privatization and another go at a failed effort to invite large stores such as Wal-Mart to invest in Indian retail may be a good place to start. The usual litany of excuses about coalition politics, impending state elections and a mindless opposition simply won't cut it for the history books.

Mr. Dhume is a resident fellow at AEI.

 

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