The India Story

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To understand India today, to steer away from the shrill debates of the past few months, and to gauge its forward trajectory, the best starting point is to internalise how we got here. Some 25 years ago, India overcame its existential dilemmas, made tough decisions, rejected autarky, and broke away from the Hindu rate of growth. This path was not preordained; it was forced upon us. Our foreign exchange reserves were barely worth three weeks of imports, resulting from the build-up of fiscal imbalances through the ’80s. Pushed, India undertook unprecedented reform. If one considers the alternative, we could have had lost decades like Russia, or faced hyperinflation that has plagued Argentina.

At that time, we faced an economic T-junction. For me, personally, who had just started out in business a year out of Columbia Business School, it was confusing, challenging, and exciting. One had studied the International Monetary Fund’s recipe and the so-called Washington Consensus. In theory, it was appealing, but empirical evidence showed it failed more often than it worked. The Federation of Indian Chambers of Commerce and Industry had an internal think tank called The Wednesday Group, where I was invited to speak. Many of the tradeoffs discussed were fundamental to how we defined the world. On one side was the benign security of continuity. On the other was the fear of economic collapse. The dilemmas were real. India could have lost its way—but it did not.

People forget the radical departures made by the Narasimha Rao government, from choosing an apolitical Manmohan Singh as finance minister, to sending opposition leader A.B. Vajpayee to lead talks on Kashmir at the United Nations. We need to be prepared for a similar break if we want to write history again.

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