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Jan

Jobless Growth an Offshoot of Liberalisation of economy

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Prof Shivaji Sarkar

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New Delhi | Wednesday | 1 January 2025

Dr. Manmohan Singh, renowned as India’s "Great Liberalizer," had an illustrious career in academia, public service, and politics long before becoming Finance Minister and later Prime Minister. Known for his integrity, intellect, and calm demeanor, Singh’s leadership left an indelible mark on India's economic and political landscape.

Singh's ascent began as Member-Secretary of the Planning Commission in 1982, followed by his appointment as Governor of the Reserve Bank of India (RBI). During his tenure from 1982 to 1985, Singh took a principled stand against increasing the statutory liquidity ratio (SLR), which would have diverted substantial funds from non-food credit to government securities. His opposition to granting licenses to controversial foreign banks like the Bank of Credit and Commerce International (BCCI) highlighted his commitment to financial integrity.

Singh faced significant political pressure, including disagreements with then Finance Minister Pranab Mukherjee over economic policies. When the government sought to overrule RBI’s authority, Singh tendered his resignation but was persuaded to stay, reflecting his firm yet cooperative approach.

 

Article at a Glance
 
Dr. Manmohan Singh, known as India’s "Great Liberalizer," had a distinguished career in academia and public service before becoming Finance Minister and later Prime Minister. His leadership was characterized by integrity and intellect, significantly impacting India's economic landscape.
Singh's early roles included Member-Secretary of the Planning Commission and Governor of the Reserve Bank of India, where he advocated for financial integrity. His pivotal moment came during the 1991 balance of payments crisis, when he implemented bold economic reforms that liberalized the Indian economy, dismantling the Licence Raj and opening it to foreign investment.
While these reforms spurred growth, they also led to socio-economic challenges, including job losses and criticisms of "jobless growth." As Prime Minister from 2004 to 2014, Singh introduced key welfare programs but faced economic slowdown and corruption scandals. Despite the controversies, his commitment to policy-driven governance and ability to navigate political challenges earned him respect, leaving a lasting legacy in modern India's economic development.

 

India’s balance of payments crisis in 1991 marked a turning point in Singh’s career. As Finance Minister under Prime Minister P.V. Narasimha Rao, he implemented bold economic reforms to liberalize the Indian economy. Singh abolished the Licence Raj, dismantling regulatory hurdles that stifled growth, and opened the economy to foreign investment.

These reforms were not without controversy. To secure an emergency loan from the International Monetary Fund, the government pledged 67 tons of gold as collateral, a move that drew sharp criticism. Singh’s policies led to job losses in public sector units (PSUs) and intensified competition, creating a mixed legacy of rapid economic growth accompanied by socio-economic challenges.

The liberalization era faced its first major crisis with the Harshad Mehta stock market scam in 1992. Manipulations in the financial system caused massive losses to banks and institutions. While RBI Governor S. Venkitaramanan was instrumental in uncovering the scam, Singh, as Finance Minister, oversaw the subsequent overhaul of India’s financial regulatory framework. The establishment of the Securities and Exchange Board of India (SEBI) emerged as a crucial reform to safeguard market integrity.

Singh’s policies, particularly his push for disinvestment in PSUs, drew criticism from various quarters. While his successors established the Disinvestment Commission to streamline the process, the sale of iconic enterprises like HMT raised concerns about the privatization of national assets. Critics accused Singh of favoring multinational corporations and facilitating foreign dominance in key sectors, branding his tenure as one of "jobless growth."

During his tenure as Prime Minister from 2004 to 2014, Singh introduced landmark legislation and welfare programs. The Right to Information (RTI) Act, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and National Food Security Act aimed to empower citizens and reduce poverty. Singh also spearheaded the Indo-US Nuclear Agreement, which, despite political opposition, marked a strategic shift in India’s global alliances.

However, his second term as Prime Minister was marred by economic slowdown, corruption scandals, and rising inflation. Critics attributed the growing non-performing assets (NPAs) in public sector banks to corporate lobbying and lenient credit policies during his tenure. These issues, compounded by public discontent, contributed to the Congress party’s defeat in the 2014 general elections.

Singh’s reforms undeniably transformed India into a more competitive and globally integrated economy. GDP growth surged during his tenure as Finance Minister, reaching 7.5% in the mid-1990s. However, industrial growth stagnated, and unemployment persisted, earning his policies the tag of “jobless growth.” By 2019, Singh himself acknowledged the phenomenon had evolved into “job-loss growth.”

Despite these contradictions, Singh’s commitment to policy-driven governance and his ability to navigate political challenges earned him widespread respect. His tenure demonstrated the potential of combining academic expertise with political acumen to address complex economic challenges.

Dr. Manmohan Singh’s journey from academia to the pinnacle of Indian politics is a testament to his vision and perseverance. While his tenure was not without flaws, his reforms laid the foundation for India’s emergence as a major economic power. Singh’s leadership, marked by integrity and humility, remains a benchmark in the annals of Indian governance. As debates about his legacy continue, his contributions to shaping modern India’s economic and political trajectory are undeniable.

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