In 1999, when Atal Bihari Vajpayee took charge as prime minister, he would begin his first and only five-year tenure in the office. His previous two terms, in the midst of political instability, lasted only 13 days and 13 months, respectively.
Eight years after the reforms of 1991, the Indian economy was only beginning to find its way. Vajpayee was faced with the prospect of having to take some tough decisions to ensure investor confidence and stability to the economy. Although he led a coalition government, Vajpayee did not hesitate to undertake the reforms.
Privatisation of government enterprises — not just their disinvestment — was a key Vajpayee government initiative. He brought in legislation to cap fiscal deficit, and rolled out reforms to fund manager UTI, ushered in a new telecom policy, and masterminded the Golden Quadilateral highways.
A look at each in detail.
Privatisation
If selling government shareholding in central public sector enterprises (CPSEs) — what Jawaharlal Nehru called the ‘temples of modern India’ — was not easy, privatising them was a distant dream. However, Vajpayee, along with his Disinvestment Minister Arun Shourie, not just offloaded equity in some of the CPSEs but successfully managed to privatise companies such as Maruti, BALCO, Hindustan Zinc, Modern Foods and VSNL.
Besides, the Vajpayee Government offloaded minority stake in many other CPSEs, such as ONGC, IOCL and GAIL, that yielded over ₹20,500 crore for the government.
Managing the fisc
The first National Democratic Alliance government enacted a new law, the Fiscal Respsonsibility and Budget Management (FRBM) Act, to keep the fiscal deficit under 3 per cent.
The FRBM Act aimed to introduce transparent fiscal management systems in the country, a more equitable and manageable distribution of the country’s debts over the years, and fiscal stability in the long run.
Though successive governments deferred bringing the fiscal deficit to the 3 per cent level, it still brought about more responsibility and accountability. The Act also prescribed three documents as part of the Budget documents: a Medium Term Fiscal Policy Statement, a Fiscal Policy Strategy Statement, and a Macro-economic Framework Statement. These documents have helped in understanding fiscal situations and planning the way ahead.
The UTI scam
After the US-64 scam came into light, the Vajpayee government took steps not just to bifurcate fund manager Unit Trust of India (UTI), but also came out with guidelines for the entire mutual fund (MF) industry. Most important was the ban on assured returns on investment in MF schemes. This brought more clarity for the investors, and also restored confidence.
The rural focus
It was a common understanding that urban India enjoyed the fruits of the reform initiatives of 1991, and that Bharat, or the rural population, lagged behind.
In order to remove this perception, the Vajpayee government launched ambitious road projects such as the Golden Quadrilateral network of highways and the Pradhan Mantri Gram Sadak Yojna. The Golden Quadrilateral connected the four metros of Chennai, Kolkata, Delhi and Mumbai through a network of highways, while the PMGSY was planned as a network of all-weather roads for unconnected villages. Both projects proved to be immense successes, and not only contributed to the growth story, but also bridged the gap between India and Bharat.
New ring to telecom
The New Telecom Policy of 1999 transformed the country’s telecom industry. The fixed-license fee regime was replaced with a revenue-sharing arrangement. The Bharat Sanchar Nigam Ltd (BSNL) was carved out of the Department of Telecommunications to separate policy formulation from services. The creation of the Telecom Dispute Settlement Appellate Tribunal (TDSAT) also separated the government’s regulatory role (performed by the Telecom Regulatory Authority of India) and its dispute-settlement roles. The government ended the monopoly of the Videsh Sanchar Nigam Ltd on international telephony and allowed private firms to offer the ISD facility.
Even today, many an economic discussion seems to hinge on these challenges only: no strategic disinvestment has happened since then; the telecom policy seems to be undergoing constant change; and managing fiscal deficit remains a challenge
Vajpayee was a master in delegating responsibilities, says a former top official who served in a key economic ministry during the NDA rule. Whether it was on the international stage, or within the country, Vajpayee’s ministers did not shy away from taking decisions.
The strength of economy was also on show when, even after sanctions were imposed in the wake of the nuclear test in Pokhran, India survived without begging, said another officer.