The Visionary: Key Decisions Of Vajpayee That Transformed India
The dhoti-kurta wearing, Hindi speaking wizard Atal Bihari Vajpayee played a big part in modernising India in real sense.
Here are some transformational policies he helmed.
Atal Bihari Vajpayee was the first non-Congress Prime Minister to complete a full term in office. He led a coalition bound by nothing much expect anti-Congress politics, scaling India’s nuclear capability and winning a war against Pakistan. Just those two things would have been sufficient to call Vajpayee a great leader.
But there was a lot more he achieved on the economic and legislative front. He started the process of structural reforms and capacity building, in a true departure from the policies of the previous governments.
Here is a recap of various transformational policies Vajpayee helmed.
The Vajpayee government envisaged private participation in airport development. Today the Bangalore, Delhi, Hyderabad, and Mumbai airports rank amongst the best in the world. Although the actual implementation only happened in 2006, the idea was mooted in the Vajpayee government times.
The process of linking the Aviation Turbine Fuel (ATF) to market rates also started during the Vajpayee tenure.
The process of selling some of the government-owned businesses to the private sector started in Vajpayee regime. He formed a Department of Divestment specifically to oversee this process. His tenure saw the Government of India moving out of 32 companies.
The Vajpayee government introduced the historical Electricity Act of 2003, which allowed separation of the various functions in the power supply chain. States were allowed to separate power generation, transmission and distribution. This process led to further involvement of the private sector in private generation and distribution.
Although power reforms are ongoing, they trace their origin to this legislation. Vajpayee government also tabled the possibility of creating economies of scale in power generation through creation of ultra mega power plants (4 gigawatts and above capacity).
For the first time, India invested in overseas oil fields. The first major investment was in Russia in the Sakhalin oil and gas field at a massive investment of $1.7 billion. India also invested in Sudanese oil fields later. This capacity building process has since continued.
The Vajpayee government also started the process to decontrol the prices of petroleum products. In fact, his key minister Yashwant Sinha notes in his autobiography Confessions of a Swadeshi Reformer, how increase in kerosene prices cost the government politically. The Manmohan Singh government stopped this process, until late in its second term, when a gradual price escalation process was restarted.
The Vajpayee government also started the mandatory requirement of blending petrol with ethanol extracted from sugarcane. This policy again did not sustain in the United Progressive Alliance (UPA) regime. The Narendra Modi government has restarted this afresh in the recent years.
India’s housing boom started due to the low interest rate regime made possible by the Vajpayee government. This housing boom attracted new private investment and helped ramp up country’s steel, cement, and construction material capacity.
The Vajpayee government established the Insurance Regulatory and Development Authority of India (IRDAI) in 2000. The IRDAI started giving licences to private life and non-life insurance players. Setting up of the IRDAI also started the process of professionalisation of the insurance sector. The Life Insurance Corporation (LIC) monopoly was broken due to these measures.
The Vajpayee government changed the why how India’s administered interest rate mechanism used to work. In 2002, the administered rates were linked to annual yields on government securities of comparable maturities. The government decided to cut administered rates (small savings scheme, provident fund) by half a percentage point in one go.
Due to better control of government spending, the inflation rates were brought down, which further kept interest rates in check. Vajpayee left the last year legacy of high growth and low inflation for the UPA government to benefit from.
Public Finance Management
The Vajpayee government introduced the Fiscal Responsibility and Budget Management (FRBM) Act in 2003. It aimed at improving fiscal deficit and making central and state government more prudent in their expenditure. Although the states never stuck to their target of 3 per cent deficit, FRBM started a debate on managing public finances more efficiently. The public sector savings rate also improved over the Vajpayee government term, which stood UPA-1 in good stead.
The Vajpayee government launched two ambitious road building efforts - National Highways Development Programme and the Pradhan Mantri Gram Sadak Yojana. The former, modelled on the American highways programme, led to the construction of the Golden Quadrilateral. The latter started a rural economic revolution of sorts, where the villages could finally leverage connectivity for economic gains.
Sarva Shiksha Abhiyan
Although the UPA government generated a lot of debate on school education due to the Right To Education (RTE) legislation, the true primary education revolution started with the Sarva Shiksha Abhiyan in 2000. This programme aimed at universal elementary education, making education free and mandatory for all children between six and 14 years of age. Plans were drawn to educate almost 200 million children in that age bracket. The government managed to reduce drop-out rates by 60 per cent in just four years.
The Task Force on Direct and Indirect Taxes set up under the chairmanship of Vijay Kelkar, which gave its report in 2002, forms the basis of most of the tax reforms we have seen since. This task force recommended several administrative as well as policy changes.
The Permanent Account Number (PAN) grew in scope and use after this report. The Income Tax department started outsourcing more of its data processing services and became more citizen experience aware. Setting up of electronic tax network was also an outcome of this report.
The task force also spoke about improvements like Direct Tax Code, indirect taxes (Goods and Services Tax implemented in 2017), and abolition of wealth tax (achieved by the Modi government).
National Pension System
The Vajpayee government launched a National Pension Scheme (NPS) in 2004. This scheme allowed central government employees who joined services after 2004 to not take the old defined benefits but rather opt for this annuity based programme. This was opened up to the private sector in 2009. The real benefit of the NPS will show up in 2040s when the first batch of central government employees opting for NPS start retiring, and government pension burden will be reduced.
India has leapfrogged mobile connectivity in just two decades. We didn’t have mobile phones until late 1990s and today we set global benchmarks in daily data consumption. The New Telecom Policy created by the Vajpayee government in 1999 was the harbinger of this telecom revolution.
All this and a lot more was achieved in a timeframe where India went to war with Pakistan, saw its Parliament attacked by terrorists, faced an international hostage crisis, dealt with natural calamities like droughts and earthquakes, dealt with manmade problems like communal riots, faced international sanctions due to nuclear tests, and the Bharatiya Janata Party had only 182 Lok Sabha seats. To top it, the international economy went through a bad time as well with the internet bust and the 9/11 attack in New York.
Despite the various rollbacks in the UPA regime, the Vajpayee legacy in governance lives on. Unfortunately, his work is not talked about in the same breath as the 1991 economic decontrol. But structurally, he achieved as much if not more.
The dhoti-kurta wearing, Hindi speaking wizard Atal Bihari Vajpayee played a big part in modernising India in real sense. What if he had got another term? What if!
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