How would one remember Atal Bihari Vajpayee? As a liberal leader or an economic liberaliser? While being a political liberal could be his compulsion as he led a coalition government, he was an economic liberaliser in the truest sense. Despite having a brief encounter with power, Vajpayee could build an era, launching liberal economic policies, that too while facing criticism, literally from left, right and centre.
All he got was roughly six years in power in three separate terms, and yet he could lead India to being the fastest growing economy in the world, at the same time dealing with coalition troubles amid international sanctions, war, drought and terrorism.
Vajpayee could herald an era of economic transformation in the shortest ever time probably because he was a great market liberaliser. Working amid coalition contradictions, he led the most free and market friendly governments in the history after 1991.
Working amid elections and contradictions, Atal Bihari Vajpayee led the most free and market friendly governments in the history after 1991. (Source: India Today)
This helped India grow at an unprecedented rate during the most paradoxical and transitory phases of recent history strewn with well-known events such as the Pokharan nuclear blast, global sanctions, Lahore bus yatra, Kargil War, Kandahar hijack, drought and terror attack on Parliament.
Pokharan -2 was indeed a courageous leap for India towards an elite global nuclear club. However, what remains untold is how Vajpayee managed the Pokharan aftermath. Pokharan happened right at the time when Indian economy was decisively embracing globalisation, after the end of an economic crisis, transition to World Trade Organisation-led global trade regime and two failed coalition governments. For an economy which was poised to fly in the sky of globalisation, Pokharan was a bigger disrupter than Narendra Modi's demonetisation. Pokharan was followed by international sanctions, and yet Vajpayee managed to attract an enthuiastic response on Resurgent India Bonds. The five-year bonds, offering high interest rate, generated funds well above the target of Rs 8,700 crore, bolstering country's forex reserves.
Post Pokharan, after coming to power again, Vajpayee launched an aggressive opening of domestic market in the form of cuts in import duties, liberal Foreign Direct Investment regime and structural reforms. Despite the lingering impact of sanctions and the Kargil War in 1999, the big and bold Brand India emerged on the global stage and India turned into a hot spot for foreign direct investment.
It was probably one of its kind in the world where a country had recorded growth in private investment right in the middle of major geopolitical upheavals.
Atal Bihari Vajpayee was the first PM of India who dared to rein in government spending. (Source: India Today)
Vajpayee's economic liberalism was structural at its core. The opening-up of domestic market for foreign investment was meticulously rested on the minimum government. In spite of an aggressive resistance from right and left of the day, Vajpayee's coalition staged an unprecedented withdrawal of government from the business by launching the first and only public sector privatisation policy. The wide ranging strategic sale of PSUs and an end of government monopoly on the various businesses were aptly complemented by the creation of independent regulators such as insurance and pension regulators IRDA and PFRDA, Competition Commission. The period also more powers being given to TRAI and Airport Authority of India.
Vajpayee was the first PM of India who dared to rein in government spending. His government brought in Fiscal Responsibility and Budget Management (FRBM) Act and set the target for government's fiscal deficit at a time when such a thought was unusual even for developed economies.
The idea of a having a single nationwide tax (GST) was first proposed under Vajpayee's tenure as part of an agenda for broad-based fiscal reforms. A task force headed by Vijay Kelkar recommended the introduction of Goods and Services Tax (GST) in 2002 with a 12 per cent rate when Vajpayee was prime minister. Thanks to the FRBM Act, India has now achieved several milestones in fiscal prudence among global investors.
It was Vajpayee's economic prudence because of which India could manage to grow at a rate of 8 per cent under his tenure. Despite all data massaging, the fact remains that India has not been able to cross this fiat ever since, neither during the 10 years of Manmohan Singh's rule nor under the Modi dispensation.
In economic context, we are still living in the Vajpayee era, positively influenced by his structural reforms. The Vajpayee era was defining because of economic liberalism than political open mindedness. Vajpayee's political liberalism was driven by the coalition politics of the time, but his economic liberalism was his choice against strong economic conservatism of the left and right.
Vajpayee built an age, but he will be recalled as a fastest builder of a nation amid extreme paradoxes. Vajpayee proved Simon Sineck right that "leadership is not about the next election, it's about the next generation".