Read To the Brink and Back: India’s 1991 Story for Free Online

asked jointly byGurudas Dasgupta of theCPI andAjit Jogi of the Congress. Dasgupta actually asked the question.
    Shri Gurudas Dasgupta (West Bengal; CPI): My question to the hon. Minister is that the balance of payments position cannot be corrected if there is no increase in the export India does. Over the last ten years there have been a number of so-called adjustments in the exchange rate and even then there has been no appreciable improvement in the export of the country. In 1966, devaluation was resorted to. Even then for the first few years export increased by only 4.5%. In this background, I would like to know how the hon. Finance Minister is optimistic that there can be increase in export so that the balance of payments position can be corrected.
    […] Part (b) of my question is this. There is a danger that the increase in export may be over-counter-balanced by the increase in the price of import […]
    Part (c) of my question is whether the devaluation was resorted to because the Government of India was under duress from the non-resident Indians and also that it was under duress because of the World Bank conditionalities for getting theloan.
    Dr. Manmohan Singh: I would like to answer the last part of the question first. We were not under any duress from anybody then and we are not [under] duress now. This was a sensible decision to do in the circumstances in which our country was placed and is now. Therefore, I don’t have to bow to the IMF or to anybody else to do what is in the best interest of the country.
    ShriGurudas Dasgupta: The Prime Minister said yesterday that the banks would have been underrun if devaluation was not done. What have you to comment on that?
    Dr. Manmohan Singh: The Prime Minister was mentioning the objective conditions prevailing then and what we did was a response mechanism which stopped those types of destabilising activities becoming a flood. This is not a question of functioning under duress at all. The first part of the question is: will devaluation lead to an increase in export? The hon. Member has referred to several previous instances. Let me say that in this country there seems to be a strange conspiracy between the extreme left and extreme right that there is something immoral or dishonourable about changing the exchange rate. But that is not the tradition. If you look at the whole history of India’s independence struggle before 1947 all our national leaders were fighting against the British against keeping the exchange rate of the Rupee unduly high. Why did the British keep the exchange rate of the Rupee unduly high? It was because they wanted this country to remain backward and they did not want this country to industrialise. They wanted the country to be an exporter of primary products against which all Indian economists protested. If you look at Indian history right from 1900 onwards to 1947, this was a recurring plea of all Indian economists—not to have an exchange rate which is so high that India cannot export, that India cannot industrialise. But I am really surprised that something which is meant to encourage the country’s exports, encourage its industrialisation is now considered as something anti-national.
    This was Professor Manmohan Singh at his scholarly best. He was also unusually combative. After all, his doctoral dissertation was on India’s exports and he had challenged the ‘export pessimism’ syndrome of the 1950s. I mentioned this to a couple of colleagues and said that sitting in the Officials Gallery and listening to the finance minister answer questions and make his interventions was a wonderful lesson in real-world macroeconomics.

    36 Two insider accounts of that episode are B.K. Nehru,
Nice Guys Finish Second
(New Delhi: Viking, 1997) and I.G. Patel,
Glimpses of Indian Economic Policy
(New Delhi: Oxford University Press, 2002). B.G. Verghese, then the prime minister’s information adviser, writes in his memoirs,
First Draft: Witness to the Making