A Maturation Crisis in India: The V. P. Singh Experiment

Abstract

Fiscal policy perhaps could be pictured as the maid servant of economic policy, entrusted with the everyday solution of petty problems, while her master pursues the broad objectives of social progress and economic development. As such, she is normally confined to the dayto-day running of cumbersome machinery that leaves little room to maneuver and very little time for strategic thinking, all the more so in a country like India where economic planning reigns supreme, at least in principle. But there are times when the maid becomes the lady and requires that her voice be heard above the usual din of the political forum. Suddenly, boring chores become burning issues and attract all the attention. Fiscal events can become revolutions in their own right-the Boston tea-partyor if not handled in time can cause kings to lose their heads-the French revolution. Nothing of the sort has happened as yet in India, but the drama of October 1984 gave the new prime minister and his finance minister, V. P. Singh, a rare opportunity to break away from established patterns of fiscal behavior and to mold them anew. Why did they do it? The new fiscal policy that Vishwanath Pratap Singh presented in his first budget (1985-86) and in his first public statements has been largely misunderstood or misrepresented. To many Western observers it was seen as part and parcel of a policy generally inspired by the philosophy of supplyside economics and by the intent to steer the economy on a Western course. To many Indian commentators it was but a kind of Reaganite gimmickry and part of a plot to subvert the socialist pattern of planning already begun by high officials under Mrs. Gandhi. For them, V. P.