Montek Singh Ahluwalia, Part I: India's Riddler On The Roof

Three years after Montek Singh Ahluwalia, 69, left Delhi for a job at the IMF in Washington DC, he received a call from his friend and fellow economist, Manmohan Singh. The Congress-led UPA had just won the general election in the summer of 2004 with triple-two seats in hand, and Manmohan Singh had just been appointed Prime Minister.

“I think Montek was as surprised as the Congress was about the win,” says a friend of Montek Singh’s who was a frequent visitor to his home in America and India. “But Manmohan calling Montek to join him in government? That was a surprise for no one.”

Manmohan asked Montek to come back as the deputy chairman of the Planning Commission in India. To which the latter says his only response was, “When?” The decision to return - to use his favourite phrase - was “a no brainer” for him.

It is now Montek Singh’s eighth year as head of the planning commission and it is a measure of both the calibre of the man and the power that flows from his friendship with the PM that he has turned what was once a low-voltage job into one of the most powerful and contentious positions in the country.

As Deputy Chairman, Montek Singh is in charge of deciding the course of India’s economy.

Should we spend more on health or on defense? Why is there still hunger and malnutrition when India runs the world’s largest school-based feeding programme? As the country faces more inequality than ever, how can the widening gap be narrowed? Should big business be subsidised? Should food for all be deemed a fundamental right? What should the allocation of funds be? What should be India’s poverty line?

In a post-liberalised era, in a country riven by literally millions of contesting realities and aspirations, it is Montek Singh who leads the search for economic answers to some of our most urgent ethical and governance questions. In doing so, he does not merely preside over some of the thorniest riddles facing the Indian economy: he epitomises them.

But why would one of the principal architects of the 1990s economic reforms even want to head an institution modelled on the Soviet Union’s state-run economy? (The planning commission is based on Russia’s Gosplan, which made the very first Five-Year Plans.)

Is it not odd for a self-confessed torchbearer of the free market economy to lead a body that monitors all central and state government spending? And what does it mean when a country struggling to fight chronic poverty is told by one of its chief helmsmen that the solution lies mainly in boosting its GDP?

These tightly wound conundrums are the birthplace of Montek Singh’s admirers and critics.

EVERYONE WHO knows Montek Singh Ahluwalia has an impressionistic story about meeting him that they don’t want people to know. Mid-narration, they abruptly stop, stray into vagueness or extract severe promises of privacy.

“It’s personal,” they say in an uncanny chorus, whether it is BJP leader Arun Jaitley, economist Abhijit Banerjee, activist Nikhil Dey, bureaucrat Gajendra Haldea, or musician Amjad Ali Khan. Trenchant public figures otherwise not shy of comment insist, “Montek will be pissed off if I talk about that.”

For his close friends and family, it’s a simple reluctance to reveal details that he wouldn’t.

But for those who know him as the deputy chairman of the planning commission, it’s a palpable nervousness about consequences. Be it industry lobbyists or social activists, colleagues or acquaintances - everyone’s worried if there could be a quiet and undramatic shutdown of access.

“If Montek doesn’t even bother to tell someone he’s displeased, it’s usually because he feels they have broken his personal trust,” says a member of the planning commission who once spent sleepless nights after he let details about an unfinished report slip to a journalist. “His usually prompt emails stopped, phone calls were not returned, and I knew it. I got a second chance only after some serious penance.”

It is not an ugly showdown they fear, but his decisive cold shoulder. When Montek Singh is discussed it is in hushed whispers, and always after much coaxing.

In his public life, however, he is rarely spared. In just the past year, his stand on food security, inflation, public-private partnerships, the 2G scam and poverty have been viciously attacked. He has been variously called a World Bank stooge, a reformer who’s lost his touch, a corporate apologist, a populist economist. He has become a man many people want out of public life, out of his job, out of the most complex debates of our nation.

In response, he says, “This dueling is good ... It’s almost fun.” During a follow-up phone call a month after I meet him, he enquires with unhidden glee if I have yet written the “damaging profile”. He’s not nervous about a hatchet job. He’s almost anticipating it.

Montek Singh had first agreed to meet me in his sprawling office in Yojana Bhavan some weeks earlier. He was in the middle of overseeing the creation of his second, and the country’s soon-to-be-released, twelfth five year plan.

It is a Saturday, the corridors are empty, and the security guards look surprised at the arrival of anyone other than Montek’s staff. I ask his personal secretary M.D. Narula how long I might have with Montek Singh.

“As long as you can keep the deputy chairman interested,” he says.

A popular news broadcaster tells me later that talking to Montek Singh is nerve-wracking because he often sounds like he’s on the verge of dropping with boredom at your silly questions.

In 10 minutes, he pokes his head out of his door and nods me in. As I sit down inside, he pops a lozenge for his cough, and disarms me with a question less innocent than it looks.

“So,” he asks, “Why me?”

It’s impossible he doesn’t know the answer. The story of him is the story of a complex, vehemently divided Indian economy. It’s also the story of simmering tensions between an elected political class and powerful technocrats like him and the PM.

Since 2004, signalled by Congress party chief Sonia Gandhi, social welfare has been the UPA’s key mandate. Farm loan waivers, guaranteed rural employment, education for all, and food security are its flagship schemes. Montek is the man who must allot funds to the concerned ministries and states.

But he is a known dissenter and openly admits these schemes will do no good as they are. So every time he argues against them or sides with energy companies against the environment ministry’s ban on forest use for coal mining, it looks like an insider gone rogue. Many in government and the Congress party have come to think of him as a rationalist obstacle, a man who wreaks serious damage with the ammunition of deft numbers.

He is fully aware of his detractors but shrugs that politicians must do what they must. “I will criticise what I think is short-termism, and yes, politicians will say, I’m being unrealistic’”

But every one of his friends and critics inevitably invokes a niggling sense of discomfort around Montek’s position as head of the planning commission. It smacks of the uneasy gait of feet in wrong shoes. Struggling to unravel what his embattled role means both for him personally and for India, a renowned policy analyst says sharply: “Sometimes I wonder if Montek Singh Ahluwalia is the right man in the wrong job.”

ODDLY ENOUGH, such doubts are rooted in Montek Singh’s greatest achievement in public office, one that won him a lasting place in Indian history.

Before he went to the Intenational Monetary Fund (IMF), Montek had worked for about three decades in the Indian government and in the World Bank before that.

Twenty-two years ago, India was facing the worst financial crisis since independence - the fiscal deficit was through the roof because government expenditure was more than its revenue, and foreign exchange reserves had tanked.

Working in the Prime Minister’s office, he authored a confidential report in June 1990 titled staidly ‘Towards Restructuring Industrial, Trade and Fiscal Policies’. It suggested breakthrough economic liberalisation. “He prepared the report secretly for Rajiv Gandhi but the press got hold of it, so we now know for sure Montek played a big role,” says economist Bibek Debroy.

Montek made an eloquent case for deregulating the industrial sector, getting rid of the License Raj and opting for market-friendly policies.

His secret paper eventually became the basis for reform in 1991, spearheaded by a core team including Manmohan Singh as finance minister and Narasimha Rao as PM. The economy was thrown open over the next decade and India was saved from plummeting into a financial abyss.

“When the reforms were carried out,” says Montek, “even the rich folk were not in favour. Not because they didn’t believe in growth, but because they didn’t believe the reform path would generate growth. We had a lot of arguing to do. That argument is now over.”

He has reason to feel vindicated. Per capita income has grown at a compound rate of close to five percent per year from 1990 to 2009. GDP growth touched 8 and 9 percent so often in the recent years that as former RBI governor Bimal Jalan says “we get impatient at less than 8”.

Despite the relative slowdown today, India has seen dazzling growth, the second highest in the world after China.

Free market reforms put India on the global map, of course, but it linked Montek Singh indelibly with the image of ‘reform architect’. Combined with his seven year stint in the World Bank this lends itself to a word that gets his goat. ‘Growthwala’, he is called disparagingly by left-leaning activists, vote-conscious politicians and in whispers within the Congress - a man whose enthusiasm about the private sector and nine percent GDP growth overtakes what many consider the greater challenge: inclusion.

(In 2006, before the approach paper to the 11th Five Year Plan was launched, ministers Mani Shankar Aiyar and the late Arjun Singh accused Montek of extensively rewriting the original draft to introduce an ideological thrust favouring neo-liberal policies. “He was supposed to tighten and edit,” says Aiyar, “but he rewrote it. After it was approved by the committee.”)

Few know, however, that Montek Singh’s earliest work as a young economist in the World Bank was on poverty. In the mid-seventies, he wrote the book Redistribution with Growth. Boston-based development economist Abhijit Banerjee says it was the first proper international data set that empirically studied relations between growth and inequality in developing countries.

Montek’s leftist leanings as an Oxford University student once had him agreeing with leftist economists Prabhat Patnaik and Deepak Nayyar who were also at the university at the time.

As Oxford union president Montek was famous for his blazing opposition to the Vietnam War and colonialism. He laughs when asked about this. “I like being reminded of my left-leaning days,” he says, but shrugs it away as “the predominant wave of the sixties and seventies.”

When he joined the World Bank, the institution was headed by Robert McNamara, who had helped lead the US into the Vietnam War and was wrestling with its moral consequences. Under him, the Bank itself was going through a radical transformation. If it once loaned funds to countries for financeable infrastructural and industrial projects, it now decided to fund government-led welfare projects in developing countries.

It was in this storm of change that Montek wrote his book on redistribution of wealth.

“Any economist with an interest in social justice would’ve wanted to roll up their sleeves and get to work on getting India better educated and fed,” says political economist Pranab Bardhan who wrote a paper for Montek on poverty and redistribution at the time.

“You want to take it on because it’s exciting and challenging. But also because you know what it’s like at home. The command-and-control economy was unravelling and the number of our poor was growing. Montek was one of the many economists trying to understand how to divide the pie. Many like him later wound up deciding that first one must increase the size of the pie.”

In a sense, this lies at the heart of the Indian economy debate: should the pie be divided or enlarged first? After a 15-year-long roller-coaster ride through various economic ideas, the tradition Montek says he feels most comfortable about now is the Keynesian one - “including the many growth oriented post-Keynesian versions”.

It’s a position he has been called to defend time and again. Around the time the PM appointed him to the Planning Commission, the Congress President Sonia Gandhi founded and chaired the National Advisory Council (NAC), a body of former bureaucrats, activists and social experts mandated to design social welfare schemes for the UPA regimes.

These two bodies, with similar mandates but opposing methods and ideologies, have locked horns fiercely many times over the past 8 years. “Montek would come to planning commission meetings insisting that biscuits or ready-to-eat packaged foods were better as midday meals than hot cooked meals,” fumes NAC member NC Saxena, also a former plan panel member.

Montek, says an exasperated development economist Reetika Khera, does not understand what being poor means. Delhi-based Khera is a campaigner for the Right to Food. Along with economist Jean Dreze, Khera has had an open, newspaper editorial-dominated war of words over Ahluwalia’s reluctance to allot funds for the scheme. “Poverty means limits,” says Khera. “So many limits that you are hemmed in with no choices.”

But Montek insistently approaches poverty as a lack of opportunity. “The government’s job is not to employ all the poor but to ensure an investment environment that will create jobs, create income, create opportunity. The onus is on the person, poor or not, to take advantage of the opportunity. But we must create the opportunities and the poor must be empowered to be able to access them.”

He is worried about converting India into a society psychologically dependent on dole and a food security bill that implies increased dependency on a corrupt Public Distribution System.

IN AN autobiographical essay, economist Bardhan writes that an economist might learn all his equations through textbooks, but he only becomes political when he looks back to where he came from.

Montek Singh grew up as the eldest of three siblings in a middle class family, whose sole earning member was the father, a clerk in the defence accounts department. Montek’s earliest recollections are going to preschool in Ambala, Punjab, and living “in what was perhaps government quarters”.

Soon, when his father was transferred to Secundarabad, the children studied in missionary-run schools. “We thought only about school and getting good ranks in class,” he says. In 1957, Montek’s father was given a choice between a promotion into the Indian Defence Accounts Services or a promotion-less transfer to Delhi. “He chose the less lucrative offer so I could go to a better high school,” says Montek.

Isher Judge Ahluwalia, his wife and a well-known economist herself, says that Montek never allowed himself to forget his “very ordinary background” in which values, government service and education were given topmost priority. “Academics is everything for both of us,” adds Isher, who herself went to a Hindi medium school in Kolkata and then to Presidency College on a scholarship from the West Bengal Board of Education.

Montek went to Delhi Public School and St. Stephen’s college on scholarship then won the Rhodes scholarship to Oxford University to major in economics. “If he didn’t do well in his academics, he could not have gone to next stage, forget all these institutions of excellence,” she adds.

When Montek admits he has not been to Ambala, his first home, since he moved out as a child, I ask if this is not at odds with his insistence on middle class values. “India’s middle class is massive but they have one thing in common - to move ahead, up, onward. Why look at the past?” he shrugs.

When Montek and Isher had their first son, Pavan, they were working in the US. "We knew we wanted to raise our child in India," says Isher. In less than two years, they returned to Delhi. Pavan now runs an investment management firm in Delhi.

Montek’s younger son Aman, now a lawyer working with former Solicitor-General Gopal Subramaniam, calls himself “the only non-economist in the family”. It is Aman’s two children that create the refuge of what Ahluwalia calls his “100 percent switch-off mode”. They are the reason he even thinks of going home for lunch sometimes.

Aman says his father would be unrecognisable to some people if they saw him around his grandchildren, “He drops everything and just lavishes them with attention,” he says.

In his own childhood, though, Aman remembers dining table conversations almost always being about economics. “But I never felt any pressure to follow the same path. The only thing my father insisted on was that we do our undergraduation in India,” he says. “He believes the education he received here is what roots him to India.”

Education is indeed Montek’s most passionate subject. When he speaks of it, his characteristic drawl acquires a speed and vigour. “Without question, we must spend more on education, to create a thinking, employable youth,” he says, beginning what turns into a breathless lecture on the subject. “We must have a lot of public schools, because everywhere in the world, education is done by the state. But you can’t have a plan without ensuring accountability.”

That, in a nutshell, is Montek’s single biggest concern about government schemes for food security, literacy, jobs: accountability. Through the 30 years he has spent in government - in the finance ministry, PMO and planning commission - he has endured the slow levers of bureaucracy.

Arun Maira, former India chairman of Boston Consulting Group and Montek’s senior in St. Stephen’s college, describes in a 2011 interview to Business Today magazine how Montek took him around the Yojana Bhavan office, pointing to room after room of filing cabinets filled with reports on every conceivable subject. Only a member of the commission at the time, not its head, he told Maira how frustrated he was by the body’s ineffectiveness. It had the best know-how and still “could not make things happen”.

Montek has also seen at close quarters the peril of excessive state expenditure. He abhors the inefficiency of a farm loan waiver or the untraceable workflow of a ration shop.

“Montek believes, like many policy economists of the reform days, that if you want efficiency, you have got to get the government out of there and bring in the private guys,” says agricultural economist Ashok Gulati, not entirely disagreeing.

Unsurprisingly, Montek has been a sworn proponent of public-private-partnerships (PPP), which the twelfth plan eagerly recommends especially for infrastructure. “Because government money is limited, wherever PPP can be used, it must be used,” he says. “We need to purge inefficiency from our system.”

This (and concerns about food prices) is where his proposal - which Khera and Dreze have been opposing - for transferring cash to the poor emanates from. A way of taking the horse to water, as he puts it. Montek objects to the food security bill primarily because he finds it too cumbersome, costly, and prone to corruption. However, universal food security - the relatively corruption-free solution offered by 45 economists in a letter addressed to Sonia Gandhi - is unacceptable to him, even though it would remove the incentives for leakages.

Bardhan, one of the signatories to the ‘universalisation’ letter, explains that every time you choose who is eligible for a BPL or APL card, you risk missing them, or allotting it to an undeserving person. “Instead, if you gave universal access to food,” he says, “those who need it will buy subsidised grain, and those who prefer better and more expensive foodgrain can buy it from the market if they can afford it.”

“It is common for liberals across the world to consider big government schemes in horror,” says NC Saxena. “But why doesn’t Montek look at the places where universal food security has worked?” He cites the example of Tamil Nadu, which has shown a high rate of growth even while managing an almost error-free food distribution system.

Although criticism of his personal lack of empathy for the poor might be exaggerated, Montek does remain disturbingly vague about why he is unconvinced by the case for universal food security. In his office, when I ask him why he is wary of almost-universal food security (all except the top 10-20 percent of the population), he looks annoyed.

“The government wanted to include only 30 percent in the priority category; the planning commission is still better - we suggest 41 percent. If people want more poor to be covered, they should complain to the government, not to me.”

When the issue was at white heat, he had widely cited the Rangarajan Committee report which had concluded that the extra subsidy of Rs. 60,000 crore needed for universalisation was just not available with the government.

“When you meet him, ask Montek how India has money to give taxbreaks for the rich and subsidies for industries but can’t spare change for the poor,” suggests activist Nikhil Dey. Volley that to Montek and he leans back in his chair and holds his head.

“Oh, that same old criticism,” he says. “But when I talk about cash transfers for the poor, that’s not good enough either. See, I might be an opinionated fellow, a pain, but I give mere advice and try to persuade. I don’t make the law.”

The author is a Special Correspondent with Tehelka.
[Courtesy: Tehelka.]

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