The Narasimha Rao Years: Economic Reform and Panchayati Raj

At a Glance

• Tenure June 1991 to May 1996
• Finance minister Manmohan Singh
• Local government 73rd and 74th Amendments
• Babri Masjid Demolished 6 December 1992
• Exam link UPSC Prelims, Modern History: India After Nehru

Where Does It Fit?

This is the eighth topic of the category on India after Nehru. The previous topic covered the V.P. Singh and Chandra Shekhar governments. This topic covers the Narasimha Rao years. The next topic covers the instability of 1996-98. Previous topic: V.P. Singh, Mandal Commission and the Chandra Shekhar Government.

How Did Narasimha Rao Become Prime Minister?

Pamulaparti Venkata Narasimha Rao was chosen to lead the Congress (I) after Rajiv Gandhi’s assassination, described in V.P. Singh, Mandal Commission and the Chandra Shekhar Government. He was an erudite scholar of several languages and a Congress loyalist who had held external affairs, defence, human resource and home portfolios under Indira Gandhi and Rajiv Gandhi. He formed a minority government. He had not contested the 1991 elections, perhaps intending to retire, but after being sworn in he won a by-election from Nandyal in Andhra Pradesh.

What Were the Economic Reforms of 1991?

Rao brought Manmohan Singh, a non-political economist then chairman of the University Grants Commission, into the cabinet as finance minister, backed him in all his steps, held the industries portfolio himself and managed the reaction in the Congress, which had been committed to socialism under Nehru and Indira Gandhi. The economy was in shambles, with a precarious balance of payments and high inflation. The Soviet model was discredited and China under Deng Xiaoping had undertaken market-oriented reforms. Rao chose market reforms, not the free-market type but a middle path with the least pain for the masses and high growth. The government did not privatise banks, reform staff rules or open up the farm sector.

The pre-1991 model is in Indira Gandhi, 1966-77: Political Developments and Socio-Economic Policies, and the reform thinking of Shastri that P.N. Dhar compared with it is in The Lal Bahadur Shastri Years and the Indo-Pak War of 1965. The first signs of liberalisation under Rajiv Gandhi are in The Rajiv Gandhi Years, 1984-89.

How Did Panchayats and Municipalities Get Constitutional Status?

Rajiv Gandhi had started the move, but it came during Rao’s tenure. The 73rd Constitutional Amendment inserted Part IX into the Constitution and added an Eleventh Schedule of 29 subjects within the functions of panchayats. It implements a Directive Principle, and states have flexibility to adapt the system to their conditions. The 74th Amendment inserted Part IXA, so that states have a constitutional obligation to set up municipalities as laid down. In both panchayats and municipal bodies there is reservation for Scheduled Castes, Scheduled Tribes and women, aiming at inclusive local self-government. The history of local bodies under British rule is in Local Bodies Under British Rule.

What Were the Security and Foreign Policy Steps?

The Punjab situation was brought under control, and Rao held state elections despite misgivings; militancy died down after 2002. The Terrorist and Disruptive Activities (Prevention) Act was passed mainly against infiltrators from Pakistan. Defence spending was increased and the Prithvi missile was inducted. It is widely believed that he ensured progress of the nuclear programme. Space technology progressed with successful tests of the Augmented Satellite Launch Vehicle and the Polar Satellite Launch Vehicle.

The Soviet Union disintegrated in 1991, bloc politics ended, and India had to rethink its foreign policy, with relations with the United States improving gradually, and with ties built with Western Europe, Japan, Israel, Brazil and South Africa; foreign policy became closely linked with economic policy. Rao launched the Look East policy to bring India closer to ASEAN through economic ties, strategic cooperation and cultural connections, which later governments continued. His overtures to China, which he visited in 1993, and to Iran proved useful when China and Iran did not favour a Pakistani resolution on Kashmir in the UN human rights body. The Cold War background is in Evolution of Nationalist Foreign Policy: Panchsheel and Non-Alignment.

What Were the Babri Masjid Demolition and the Corruption Cases?

The BJP raised the Ram Janmabhoomi issue to its advantage in the 1991 elections, and the Vishwa Hindu Parishad grew more aggressive. The VHP announced that work on the temple would begin on 6 December 1992, and thousands of kar sevaks gathered at Ayodhya. Though the announced plan was prayers on a platform near the mosque, groups of kar sevaks moved towards it armed with iron rods despite appeals from the RSS and police, scaled the walls and reduced the mosque to rubble. BJP leaders such as Advani are reported to have called them back without success, and the police did little. Uttar Pradesh was under BJP rule with Kalyan Singh as Chief Minister. Communal riots followed in Uttar Pradesh and other parts, with Bombay among the worst, and in 1993 bomb blasts took place in the city. The Centre was criticised for not imposing President’s Rule in anticipation; the Uttar Pradesh government was dismissed only after the destruction. The earlier events at Ayodhya are in The Rajiv Gandhi Years, 1984-89 and V.P. Singh, Mandal Commission and the Chandra Shekhar Government.

A one-man commission under Justice Liberhan was appointed ten days later, and it submitted its report in June 2009 under the UPA government. It held 68 people culpable, including L.K. Advani, Murli Manohar Joshi, Atal Bihari Vajpayee and Kalyan Singh, and called the Kalyan Singh government the key to the plan. It accepted Rao’s contention that it was not constitutionally possible to impose President’s Rule in Uttar Pradesh before the event and did not criticise the Rao government. In July 1993 the government survived a no-confidence motion when some members of the Jharkhand Mukti Morcha and the Janata Dal (Ajit Singh) voted against the motion, and it was later alleged that JMM members were bribed; a special court convicted Rao and Buta Singh in 1996 on investigation, but on appeal the decision was overturned and both were cleared in 2002. Rao was also named in the Harshad Mehta stock market scam and in the hawala and Lakhubhai cheating cases and was cleared in them. As an analytical point, the demolition changed the relation between the communities and the style of politics, and the reforms of the same years changed the economy, so the Rao years left two lasting and very different legacies. In Kashmir, militancy grew with help from Pakistan, the cry for jihad was taken up by groups such as the Lashkar-e-Toiba, and the Pandits left the Valley.

How Did the 1996 Elections and the Rise of the Dalit Voice Change Politics?

The elections of May 1996 were fought on Ayodhya, the economy and corruption, along religious and caste lines, with the Congress torn by factions, and no party won a majority. The BJP won 161 seats and with its allies 187, the Congress came second, and the National Front-Left Front group won 114. Rao resigned. The Dalits, who had gone to the Congress after Ambedkar’s death and to leaders such as Jagjivan Ram, increasingly formed their own party. Kanshi Ram, who quit government service, organised Dalit employees in BAMCEF and started the Bahujan Samaj Party, which drew Dalits, OBCs and Muslims and was strongest in Uttar Pradesh, winning more than 60 seats in the 1993 state elections. Mayawati succeeded him and in June 1995 became the first Dalit woman Chief Minister of Uttar Pradesh. The next government is in Political Instability 1996-98: Vajpayee, Deve Gowda and I.K. Gujral.

Why Is This Topic Important?

• 1991 reforms Features and persons are frequent Prelims and GS Paper 3 facts
• 73rd and 74th Amendments Part IX, Part IXA and the Eleventh Schedule are standard questions
• Babri demolition A turning point in communal politics

What Came Next?

The next topic covers the unstable years from 1996 to 1998 under Vajpayee, Deve Gowda and Gujral. Next topic: Political Instability 1996-98: Vajpayee, Deve Gowda and I.K. Gujral.

Key People and Terms

• New Economic Policy The 1991 package
• Eleventh Schedule 29 subjects of panchayats
• Part IXA Municipalities, inserted by the 74th Amendment
• Look East policy Engagement with ASEAN begun under Rao
• Liberhan Commission Inquiry into the demolition
• SEBI Act, 1992 Securities market regulation

Exam Corner

Mains Angle

Questions ask about the reforms and their politics. These points add depth.

• Reform Middle path
• Governance Local government
• Costs Communal violence and scandals