Manmohan Singh was India’s economic freedom fighter

IT IS FITTINGFDIFDI IT that Manmohan Singh, who unshackled Indian trade and industry as the country’s finance minister in 1991, was the son of an importer. His father’s firm in Peshawar brought dry fruit and spices to India from Afghanistan. As a schoolboy, Mr Singh would fill his pockets with almonds and raisins that his classmates tried to steal. Even from an early age he appreciated the fruits of international trade.Clever and studious, Mr Singh probably did well in the school-leaving exams he took in 1947. But he would never find out. In breaking free from colonial rule, India was also breaking violently in two. Peshawar would become part of Pakistan. To take his exams, Mr Singh had to cross a city scattered with corpses. It was a futile expedition. Amid the chaos, the results were never announced.He fled with his family to northern India. He had little money but plenty of aspirations, much like the new republic itself. The country’s investment needs were vast. The equipment and other capital goods it needed to industrialise would mostly have to be bought overseas. That left precious little hard currency for everything else. The country’s economic planners strictly policed imports and zealously protected homegrown alternatives. Generations of Indians grew up craving anything “from foreign”, even simple hairclips and scissors.Lacking textbooks or even a watch, Mr Singh travelled alone to Delhi in 1948 to retake his exams. Judging by the interviews he gave decades later to his daughter, Daman Singh, there was much about this tumultuous period that he could not remember and plenty he might have liked to forget. But he recalled with sparkling precision his exam result: 694 out of 850.Even better results would follow at Punjab University and then at Cambridge and Oxford. Amid his academic success, he was quietly confident and confidently quiet. One professor remembers his “excessive diffidence”. Another described him as a “loner”. In one letter, he complained that he had spent £6 on extra crockery for guests. That he occasionally had to entertain half-a-dozen people was something to write home about.This aloofness would normally have barred him from becoming a politician let alone the prime minister, master of ceremonies for over 1bn people. But his modesty was in fact a prerequisite. A self-assertive man would never have been acceptable to Sonia Gandhi, the foreign-born leader of the Congress party, who wanted to hold power without holding office after her party’s surprising success in the 2004 elections.In his writing and his decisions, moreover, Mr Singh could be trenchant. His doctoral thesis in 1962 took on the “export fatalism” that cursed India’s economic strategy. Previous scholars had seen little room for growth in India’s principal exports, such as jute, cotton textiles and the tea that filled English crockery. “It is [the] better part of wisdom to accept this unwelcome and brutal fact and to prepare to live with it,” one wrote. Export earnings and, thus, hard currency would remain scarce, according to this view. That, in turn, justified steering investment towards industries that replaced foreign goods, not those serving foreign markets.Mr Singh did not accept this fatalism. The blame for India’s stagnant exports was not just global forces outside of India’s control, but also domestic “stumbling blocks” that Indian policymakers had left in exporters’ way. As finance minister almost 30 years later, he had a chance to put his ideas into action. In 1991, the country was on the brink of a crisis exacerbated by the first Gulf war. Default seemed imminent. To secure an international loan, India’s central bank had to air-lift some of its gold to London.It was clear that India needed to cut spending by reducing the budget deficit. Mr Singh and his allies also believed it could “switch” spending by devaluing the rupee. The cheaper currency attracted foreign demand for India’s exports and discouraged spending on imports. These two measures might have been enough to solve the immediate crisis. But the “diffident” Mr Singh seized his chance to go further. The rupee devaluation gave him cover to reduce import tariffs and remove costly export subsidies. He also opened the door to greater foreign direct investment () and gave Indian firms more freedom to expand without a licence. The reforms reinforced each other, as one of his trusted allies, Montek Singh Ahluwalia, has pointed out. India, for example, found it easier to attract from Japan when it became possible for Japanese expats to import food items from their home country.The economic consequences of Mr Singh were vast. Lant Pritchett of Harvard University and his co-authors have tried to add up all of the extra goods and services India produced from 1993 to 2002 that an unreformed economy would not have. Converted into today’s dollars and appropriately discounted (because the benefits were spread over years) the total could exceed $1.5trn.As prime minister from 2004 to 2014, Mr Singh reaped some of what he had sowed. The economy grew by about 7% a year on average, despite the global financial crisis and a spate of corruption scandals that paralysed government decision-making. Foreign capital was often plentiful. And dollars also poured in from exports of services, an industry that did not exist when the export fatalists issued their brutal projections. India’s foreign-currency reserves, only $1.1bn in mid-1991, exceeded $280bn by the end of his tenure and are now more than double that.But despite this transformation, India is still deeply insecure about its position in the global division of labour. Its tariffs remain higher than most of its Asian peers. It refused to join the Regional Comprehensive Economic Partnership, an Asian trade deal, because it feared competition from China. Some influential economists doubt India can ever emulate East Asia’s manufacturing success, given its stronger unions, restrictive land and labour laws, and patchy education. Mr Singh has passed away. Export fatalism lives on.