NEW DELHI: Prime Minister Manmohan Singh fought for his reputation as the architect of India’s economic reforms on Friday, insisting that the current growth and currency crunch was no repeat of the 1991 balance of payments crisis that made him a household name.
An economist by training, Singh’s long political career has been book-ended by crises.
As finance minister 22 years ago, he deftly ushered in reforms of a state-shackled economy that helped launch years of rapid growth, earning himself a place in history as the man behind India’s emergence as a new economic power.
Now 80 years old and heading into his last months as prime minister before elections, the growth bubble has burst. The latest GDP figures on Friday showed an economy growing at just 4.4 percent, the weakest pace since the global financial crisis and a far cry from ambitions for growth of 8-9 percent.
The country is saddled with hefty fiscal and current account deficits, and the rupee has fallen like a stone in recent weeks to successive record lows.
But Singh, struggling to make his thin voice heard above the din of bellowing lawmakers in parliament, said 2013 was not 1991: the exchange rate is now market set, and India has enough foreign exchange reserves to cover seven months of imports compared with just three weeks back then.
“There is no reason for anybody to believe that we are going down the hill and that 1991 is on the horizon,” he said, in his first substantial comments since the rupee suffered its steepest-ever monthly fall in August.
India’s currency predicament is partly due to an emerging-market selloff triggered by the U.S. Federal Reserve’s plans to rein in its economic stimulus.
However, it has been compounded by what Singh admitted was “a crisis of confidence” in a country where welfare programmes and subsidies for the poor remain priorities for his Congress party, especially as it heads into a difficult election that is due by next May.
Singh sparred with opponents in parliament who said his legacy was at risk if he did not get a grip on the economy. Opposition leader Arun Jaitley said his track record as prime minister was one of populist policies, not reform.
“If you continue to follow the course, then the legacy that you leave behind will not be the legacy that you left behind as the finance minister. That legacy was different,” Jaitley said.
Singh blamed the main opposition party’s intransigence for India’s slow progress on a second round of deep economic reform, and said his reputation was intact on the world stage.
“There is a collective responsibility we owe to our country to send out a message to investors both domestic and foreign that India remains a viable, bankable, creditworthy proposition,” he said.
“Whatever some members of the house may say about me as the prime minister, I command a certain status, certain prestige and a certain respect in the Group of 20.”
Only the most pessimistic investors believe India is on the verge of a crisis as severe as 1991, when the central bank was forced to pawn 67 tonnes of gold in Europe to pay the bills, but the parallels are unavoidable.
Now, as then, a large import bill, rising oil prices on the back of geopolitical tensions and weak exports have resulted in a wide current account deficit.
Back in 1991, Singh responded with shock treatment, devaluing the rupee by nearly 19 percent. So determined was he to push this through that when the prime minister of the day got cold feet at the last minute, he reportedly blamed the infamous inefficiency of India’s telephone system to pretend that he could not contact the central bank in time to stop the move.
Singh later said that a crisis “concentrates the mind.”
Now, after nine years at the head of fractious coalition governments and battered by waves of corruption scandals, Singh appears to have lost some of that agility and resolve.
He is often pilloried for staying mostly out of the public eye while the country’s economy goes from bad to worse. In 2012, Time magazine ran a cover story beneath the headline “The Underachiever.”
There is still broad respect, however, for the man who was born into a poor Sikh family, studied by candlelight to win scholarships to Cambridge and Oxford, earned a doctorate with a thesis on the role of exports and free trade in India’s economy and became governor of the central bank in the 1980s.
Sanjaya Baru, a former media advisor to Singh, said there was little the prime minister could do ahead of the election to change investor sentiment about India.
“In ’91 the difference was all the policy action was taken in the beginning of the new term. Everybody knew these guys were going to be in office for a reasonable period,” Baru said.
“I don’t think the mood of investors will change until there is an election … They just feel that this government is in the shadow of an election, and that shadow has to pass.