Narasimha Rao initiated market reforms out of compulsion: Jaitley

Jaitley blamed the now much maligned Hindu rate of growth to the Nehruvian economics.

Mumbai: Former prime minister Narasimha Rao was not a "big liberaliser" and he initiated reforms out of "compulsion" due to failure of Nehruvian economics which held India back while its Southeast Asian neighbours marched ahead, Finance Minister Arun Jaitley said on Saturday.

Jaitley said that Rao, under whom economic reforms were initiated in 1991, was forced to come out of the Nehruvian mindset to help avoid a sovereign credit default and added that the Congress leader was "not a great reformer" or a "big liberaliser".

Citing an an incident mentioned in a book on Rao (Half Lion: How PV Narasimha Rao transformed India), Jaitley said, "When Rao was the law minister of Andhra, his first decision was that all private colleges should be abolished and only government should run the colleges."

"But when he became the prime minister, he found that there were no foreign reserves left in its kitty, and that the country was heading towards bankruptcy. So, the reforms were brought in due to that compulsion, due to failure of that system," told a gathering of the BJP workers in Mumbai.

Contesting the assertion that Rao was the force behind the liberalisation drive, he said, "it was not that former prime minister Narasimha Rao was a big liberaliser."

Jaitley blamed the now much maligned Hindu rate of growth to the Nehruvian economics.

"While in the 1950s and the 60s we had limited resources, the 70s and 80s were wasted decades, which contained our growth rates at 1-2 per cent per annum," he said.

"When Japan, Korea and Taiwan were on the path of economic success, we're impacted by the Nehruvian thought as there was a thinking that there were some work that only the government can do," Jaitley said

As an example, he cited the growth of the telecom sector after the entry of private sector. "From 1947 to 1995, the government thought that giving telephone connection was something which it should only do it. In the first 50 years, less than one per cent of the Indians had telephones.

"But when private sector entered the telecom sector, the number of telephone connections increased to over 80 per cent in just 20 years," Jaitley said, adding "we came out of the Nehruvian mindset only out of compulsion". "In the first two-three decades after the Independence, our growth was around 1-2 per cent, or maximum 2.5 per cent.

Compared to world economic growth, we were nowhere. "At that time the mindset was that all the responsibilities were of the government... impacted by the Nehruvian thoughts," Jaitley told his partymen.

Stating that our Asian neighbours marched ahead during this time, he cited the example of Japan, Korea and Taiwan in particular which adopted technology and linked themselves to the global economy so that the whole world became a market for them.