N arv * ” economy went through major qualitative changes Breaking away with the past trends. In the Sixth Five-year Plan (1980-85). the economy grew at about 5 2 per cent compared to the annual average rate of only 3.5 per cent In the prevtoua three ck^wicB

But this was not a smooth transition. The beginning of the Sixth Plan coincided with the second oil shock putting severe pressure on India s bal anc^ of paymenta. India entered into an Extended Fund Facility (EFF) arrangement with the International Monetary Fund for about 85.8 billton dollars. But the change in economic policies Initialed in the Sixth Plan gave boost lo exports and the balance of payments dlfTk-ultics eased In fact, in 1984 India decided not to draw the last Instalment of 81.4 billion dollars under the EFF arrangement. However. In the second half of the 80s during the Seventh Five Year Plan, the economy faced major difficulties Inspttc of a GDP growth rate of 5.5%. The Seventh Plan (1985-90) emphasized the role of the private sector more than in any previous Plan. It reflected a noticeable move towards policy reforms which were under contemplation In the preceding several years. In early 1990, the domestic market was deregulated over a large area and a 3-ycar import-export policy was drawn up setting a goal for reducing the trade gap. It also Involved re-

trade.

The growth of foreign trade In that period was significant. Imports went up from about 4 to 10 per cent of the GDP. This was accompanied by other adverse developments such as a rapid growth in budgetary deficits, Increase in the rate of inflation, and a rapid growth in India's external debts — both short-term and long-term. Over and above, the population growth rale which was projected to come down to 1.5 per cent continued to hover around 2 per cent.

The recently announced reforms tn the industrial, trade, exchange rate and fiscal policies will undoubtedly bring significant changes tn the production structure of India's economy. These reforms have received praise both internally and externally, most of all by aid agencies and the international community. The Brcttonwoods institutions believe that India has "great International potential" and that the recent policy reforms will help to realize the potential faster.

The Indian experience shows that transition from a regulated economy lo liberalIzatfon can face more hurdles in democracies. The. politicians of the ruling party, long used to authority and control, particularly on public enterprises, are reluctant to give up their hold So are the bureaucracies. The vocal left In India and activist intellectuals spared no time In criticising many aspects of the new policies. The generation of Industrialists who prospered In the era of Import substitution also raised their voices. Intention to divest Government equity tn public sector enterprises raised confusing questions of political economy, social Justice and equity. In many countries Including Bangladesh, similar factors, have delayed or obstructed needed policy re form measures even where rationale for policy changes have been clearly established on professional and economic grounds. Needless to say that economy reforms can succeed only when these arc implemented with broad-based political support. As an Indian commcnta tor has recently mentioned "An economist's drcam may be a politician's nightmare". To the extent opposition political parties did not create a political crisis and to the extent the initial unhappiness within the Congress Parliamentary Party also seem to have been assuaged, it may be concluded that the new economic policies In India now enjoy more support than opposition. Nevertheless, many commentators in India have observed that 1t would have created a much better political tradition if the ruling party had taken the opposition leaders Into confidence before finalization of the new measures. This Is something which has also not happened in the other two countries of South Asia who have introduced economic re forms i.e. Bangladesh and Pakistan. In fact in Bangladesh strong opposition to some rational measures came from within the party in power.

Illis not surprising that tn India with a large number of able economists, the new economic strategy of Dr Manmohan Singh, who is believed to be the principal architect of these policies, have received assaults on the intellectual front. Quoting Galbraith on his piece on "Rushing to Capitalism' many economists feel that the Brettonwoods institutions may be having a 'premature celebration" on changing economic philosophies In India, and for that matter in other South Asian countries. Some economists have gone so far as to draw a parallel between Dr Manmohan Singh's policies and the Mahalanobish plan insofar as the new strategy is completely silent on the agriculture sector. In my discussions with several top economic policymakers. however, there appeared to be a belief that the strategy In the agriculture sector is. by and large In place. There are others who would dtsagree and point out that the agriculture sector has been penalized through raising costs of inputs. Policy makers point out that the new policies have eliminated any discrimination between agricultural and non-agricultural exports, and government retains effective Instruments for intervention In the major crop sectors (cereals, cotton, jute, etc) If found necessary.

Economic and political environments cannot be replicated between countries. But It will be unwise to ignore what can be learnt from experiences of other countries. It Is expected that policy-makers of the new Government In Bangladesh will keep these tn view and respond to compulsions facing the economy realistically for short, medium and long term benefit. For a democratically elected Government there is no 'need' to put every single administrative and economic measure to vote before organized groups and lobbies. In a sense the populism of some politicians in Bangladesh might as well have become a policy maker's nightmare. The present and future Governments of Bangladesh must handle the twin issues of economic development and democracy efficiently. There is no room for temporizing, far ices for policy reversals.

It Is In this context that I have just Interviewed Dr Monmohan Singh, the Indian Finance Minister who enjoys high reputation and prestige both nationally and internationally for his Intellectual attainments, administrative abilities and pragmatic approach. I have known Dr Singh as the Chief Economic Adviser to the Government of India. Finance Secretary (Department of Economic Affairs) and. Governor of the Reserve Bank of India. For a while be was also appointed Deputy Chairman of the Indian Planning Commission, before joining his last assignment as Secretary General of the South Commission. The discussions are recorded below in the form of questions and answers. Questions and Answers

Syeduzzaman (SZ) ; New economic policies being adopted by many developing countries In general Including policy reforms recently Introduced by India will significantly reduce the role of the Government. How do you see the future role of politics and polttictans In India In this con text ? With largely reduced direct control on the economic life. the politicians will have much fewer Issues to make promises upon. Would you agree?

Manmohon Singh (MS) : The Government will have plenty of basic things to do In the new situation. The Government will have to be more active on social services, agriculture and rural development. and management of the environment These are things which the market and the private sector cannot do. Moreover, improvement of the law and order situation will remain a major challenge to the Government. The politicians will have to place before the people credible programmes for raising their level of living. There is no danger in any country with introduction of market oriented economic polices that the politicians will be short of work. In fact, with economic restructuring the Government and the politicians will have a greater Opportunity for dealing with basic social services. If credible programmes are presented to the people and implemented, democratic forces will get a boost and there will be a faster progress in alleviation of poverty.

SZ : To what extent the new economic strategy and policy package introduced recently in India Is the outcome of internal realities and to what extent have the external environment and external forces influenced them 7

MS : We do not operate tn a vacuum. In today's world internal and external economic environment interact in a

exception. But the policies we have adopted are bom out of our own experience. For example, even after 45 years, our foreign exchange difficulties continue. The past policies which we have followed have not produced results as far as the external sector Is concerned. We, therefore, had to do serious rethinking. The new policies are a reflection of these rethinking and exercise. Like several other South Aston countries productivity of Investment in India has declined. If we have to be competitive. we have to change the environment and provide opportunities for modernization and technological Improvement. If our new Industrial policy succeeds, and Industrial growth is realized as envisaged. Government revenues will also grow and provide resources for Government's social sector programmes.

SZ : In your view, with outward looking market oriented Industrial and trade policies will South-South cooperation expand or shrink ?

MS : In my view, such policies can only enlarge the areas of cooperation. If developing countries of the 'South' flourish, it will be a source of strength to other developing countries. A growing Bangladesh economy and prosperous Bangladesh can be a source of strength for its neighbours. Growth of the 'South' will increase the poten—< far newer miiia— —d dynamic competitive advantage can be realtoed. If the economy grows faster. then the fear of trading will disappear The ex tent of cooperation between neighbouring developing countries includtag^those fn South believed For neighbouring countries everywhere, the stlon is not always caught*in official statistics.

SZ : Looking at the South Asian situation. one can see that the number of people tn

Ing and tn fact increasing tn many countries. same is the case with literacy, population growth rate is not under effec | Hue control, environmental degradation is rampant tn all countries, official development assistance tODA) to South Asia Is on the decline. the share of South Asia tn global trade has declined. and South Asia has been unable to attract direct foreign private investment which is flowing on a significant scale from Asian NIC and Japan. In fact South Asia is being marginalised tn the global context. fn this situation should the South Asian countries sit idle 7 Is there any scope of collective initiative or should the countries continue to pursue Individual policies?

MS : South Asian countries cannot sit idle. Well, things have deteriorated, as you have described. But there are opportunities and potential for collective initiatives In several areas. In this situation, however. the primary responsibility will still be with the national governments. For example. sound macro-economic policies and Investment priorities are necessary pre-conditions for addressing many of the issues mentioned by you, particularly trade and invest ment. The countries of South Asia should individually pursue such policies and simultaneously look for enhanced cooperation. Better national policies will not only be beneficial to the countries themselves, but will also create conditions for greater cooperation. For example. If one country gives over-protectton to its Industries through exchange rate policy. then It Is likely to have an adverse and distorting Impact on Its neighbouring countries. There may be many such examples. The SAARC framework can be used to look for. opportunities for greater cooperation in a number of areas which have been identified. Side by side with rational policies for trade and Industry, the South Asian countries have to pay greater attention to the social sectors also for human development without which other policy initiative will be Inhibited.

SZ : Thank you. Dr Singh, for your time.