Making the State Change Its Mind – the IMF, the World Bank and the Politics of India's Market Reforms
2009; Taylor & Francis; Volume: 14; Issue: 2 Linguagem: Inglês
10.1080/13563460902825973
ISSN1469-9923
Autores Tópico(s)Social and Economic Development in India
ResumoClick to increase image sizeClick to decrease image size Notes The author wishes to thank Richard Sandbrook, Rob Jenkins and Baldev Raj Nayar for their comments on earlier formulations of the argument advanced in this article. Srinivasan (2001 Srinivasan, T. N. 2001. "Indian economic reforms: background, rationale, achievements and future prospects". In Selected Papers of T.N. Srinivasan: Economic Policy and State Intervention, Edited by: Nayarana, N. S.S. New Delhi: Oxford University Press. [Google Scholar]: 245) has described Rao's reforms as 'systemic and conceived as a package of coordinated action in several areas [emphasis in original]'. Srinivasan, an eager proponent of the NEP, saw it as a major departure from the liberalisation 'of the more irksome controls at the margin' that was typical of the 1980s. An important aspect of the 'Washington Consensus' model was its disregard for the external explanations of policy failure that were privileged among development economists. With its undiluted emphasis on the internal causes of policy failure and on the onus of domestic governments to correct these, the model conveyed an unusual lack of scepticism about what developing countries stood to gain from integrating with global markets and interacting with powerful global institutions (see Gore 2000 Gore, C. 2000. The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries. World Development, 28(5): 789–804. [Crossref], [Web of Science ®] , [Google Scholar]). Given its alignment with Washington Consensus prescriptions, India's NEP marked a breach with not only the statism of the Left, but almost 50 years of nationalist anxiety over India's positioning within an unequal global order – for further on this argument, see Sengupta (2008) Sengupta, M. 2008. How the State Changed its Mind: Power, Politics and the Origins of India's Market Reforms. Economic and Political Weekly, 43(21): 35–42. [Google Scholar]. Ahluwalia, who served as Finance Secretary in the Ministry of Finance from 1991 to 1996, is seen as one of the key architects of the NEP (see Table A1 in the Appendix for a summary of his career path). For a classic Marxist explanation of the liberalisation of the early to mid 1980s, see Patnaik (1985) Patnaik, P. 1985. On the Political Economy of Liberalisation. Social Scientist, 13(7–8): 3–17. [Crossref] , [Google Scholar]. Patnaik sees liberalisation as the consequence of pressure from domestic big business which, after years of protection, wished to expand into areas reserved for the small-scale and public sectors. One argument in this vein is that structural adjustment, with its accompanying message of political decentralisation, held out the promise of extricating national-level leaders from 'demands percolating upwards from other levels of the political system' (Jenkins 1995 Jenkins, R. 1995. Theorising the Politics of Economic Adjustment: Lessons from the Indian Case. Journal of Commonwealth and Comparative Politics, 33(1): 1–24. [Taylor & Francis Online], [Web of Science ®] , [Google Scholar]: 16). Not surprisingly, government economists and economic policy officials show a preference for the 'change in mindset' argument, and tend to also highlight the catalysing role of the acute economic crisis that struck India in early 1991. See, for example, Ahluwalia (1994) Ahluwalia, M. S. 1994. India's Quiet Economic Revolution. Columbia Journal of World Business, 29(1): 7–12. [Crossref] , [Google Scholar]. Kohli (1989 Kohli, A. 1989. The Politics of Economic Liberalization in India. World Development, 17(3): 305–28. [Crossref], [Web of Science ®] , [Google Scholar]: 309) is even more direct: 'in a large and relatively well established polity like India – well established in the sense of being staffed by competent bureaucrats – one has to maintain that organizations such as the IMF and the World Bank can never be decisive'. In contrast, Pakistan received its first structural adjustment loan in 1982, which was followed by sectoral adjustment lending later in the 1980s (see Guhan 1997 Guhan, S. 1997. "The World Bank's lending in South Asia". In World Bank: its first half-century, Edited by: Kapur, D., Lewis, J. and Webb, S. Washington, DC: Brookings Institute. [Google Scholar]: 382). For a similar argument, see Pedersen (1993) Pedersen, J. D. 1993. The Complexities of Conditionality: The Case of India. European Journal of Development Research, 5(1): 100–11. [Taylor & Francis Online] , [Google Scholar]. Indeed, one popular argument is that the Rao government used the cover of multilateral pressure to push through some the more unpopular aspects of a wholly internally generated reform program – for an academic representation, see Currie (1996 Currie, B. 1996. Governance, Democracy and Economic Adjustment in India: Conceptual and Empirical Problems. Third World Quarterly, 17(4): 787–808. [Taylor & Francis Online], [Web of Science ®] , [Google Scholar]: 798). Thus, Rao's Finance Minister, Manmohan Singh, said he saw 'no reason to be defensive about our agenda … when we are implementing our own agenda' (Singh 1993 Singh, M. 1993. "New economic policy, poverty and self-reliance". In New economic policy: reforms and development, Edited by: Prasad, S. and Prasad, J. New Delhi: Mittal. [Google Scholar]: 23–4). The term 'soft sell' is borrowed from Teichman (2001 Teichman, J. A. 2001. The politics of freeing markets in Latin America: Chile, Argentina, and Mexico, Chapel Hill, NC: University of North Carolina Press. [Google Scholar]: 64). Teichman sums up 'soft sell' as 'building policy networks based on personal trust [in order] to influence and sometimes even guide the specific direction and nature of reform'. My understanding of 'learning' or 'social learning' is derived from discussions of the state and public policy choice in the advanced industrialised states. 'The most important influence in this [process of] "social learning"', as Paul Sacks puts it, is the 'previous policy itself' (Sacks 1980 Sacks, P. 1980. State Structure and the Asymmetrical Society. Comparative Politics, 12: 349–76. [Crossref] , [Google Scholar]: 356). In fact, as suggested below, lessons from the Indian case were possibly crucial to this process of internal learning. Terms such as 'paradigm change' or 'paradigm shift' are frequently used to capture the scale of the changes represented by the NEP. See, for example, the World Bank (1996 World Bank. 1996. India: five years of stabilization and reform, Washington, DC: Oxford University Press. [Google Scholar]: xvii, 31). It merits noting that while business and agrarian elites were consistently opposed to Nehru's statist development strategy, their support for liberalisation was intermittent and selective. Since the domestic business class feared foreign competition, their demand for market reform was typically limited to domestic deregulation. The liberalisation of the country's trade and foreign investment regimes was resisted (see Kohli 2007 Kohli, A. 2007. State, Business, and Economic Growth in India. Studies in Comparative International Development, 42(1–2): 87–114. [Crossref], [Web of Science ®] , [Google Scholar]; Patnaik 1985 Patnaik, P. 1985. On the Political Economy of Liberalisation. Social Scientist, 13(7–8): 3–17. [Crossref] , [Google Scholar]). The agrarians' demands for market reform were usually limited to the liberalisation of the agricultural trade, as they wished to retain other agriculture-specific interventionist tools, such as support prices for crops and subsidies on fertilisers, water, and other inputs. For an account of the political rise of these agrarian elites and their demands, see Varshney (1995) Varshney, A. 1995. Democracy, development and the countryside: urban–rural struggles in India, Cambridge: Cambridge University Press. [Crossref] , [Google Scholar]. One prolific contributor to the literature suggests, for example, that the reforms were the outcome of 'social learning', in which the country's 'key leaders [came] to understand that earlier policies had failed to meet India's own goals, and [that] there was hardly any merit in persisting with them' (Nayar 1998 Nayar, B. R. 1998. Political Structure and India's Economic Reforms of the 1990s. Pacific Affairs, 71(3): 349–50. [Crossref], [Web of Science ®] , [Google Scholar]: 349–50). For an argument on the 'inevitability' of the reforms, see Lal (2000) Lal, D. 2000. Unfinished business: the Indian economy in the 1990s, Delhi: Oxford University Press. [Google Scholar]. It was noted, for example, that borrowing governments would often agree to conditions that they had no intention of fulfilling (Sachs 1989 Sachs, J.D. 1989. "Conditionality, debt relief and developing country crisis". In Developing country debt and economic performance Edited by: Sachs, J.D. vol. 1 (University of Chicago Press)[Crossref] , [Google Scholar]: 261). Teichman (2001 Teichman, J. A. 2001. The politics of freeing markets in Latin America: Chile, Argentina, and Mexico, Chapel Hill, NC: University of North Carolina Press. [Google Scholar]: 59–60) indicates that, in her Latin American cases, such 'relationships of trust' were facilitated by the fact that 'by the mid-1980s, officials at the helm of the most powerful ministries … in Latin American countries were increasingly people with graduate degrees in economics from American universities … . Some had gone to graduate school with the very multilateral officials with whom they were now negotiating'. One must note that Teichman and Harrison have a more sceptical view of the consequences of the BWIs' intervention than does Woods (or John Lewis, whose work is discussed in the next section). Harrison's critique exposes the sheer invasiveness of 'soft sell'. This was a strategy predicated on an external actor's resolute infiltration of internal decision-making arenas. If the 'hard-sell' mode of conditionality presented an open challenge to a country's sovereignty, the 'soft-sell' approach quietly mocked it. The Lewis volume suggests that, in the 1960s, the BWIs quite openly reflected US economic interests and foreign policy priorities. The World Bank, in particular, was drawn into a tight alliance with the USA in 1958, when they jointly formed the Aid India Consortium in order to coordinate the flow of Western development aid to India (the countries covered, besides the USA, were Canada, Japan, West Germany and the UK). While the magnitude of Consortium aid to India was substantial, when compared with more strategically important countries, India was grossly under-aided (when assessed in terms of aid per head). In US$ per head, India received (average of 1962 and 1963) US$1.8, as compared with US$4.4 for Pakistan, US$13.3 for South Vietnam and US$62.0 for Israel, and US$5.4 all other less developed countries. The only country receiving fewer dollars per head was Indonesia. Derived from figures presented in Table 13 of Little and Clifford (1966 Little, I. M.D. and Clifford, J. M. 1966. International aid, London: George Allen & Unwin. [Google Scholar]: 66). These reforms were to be in line with the recommendations of the Bell Mission, which was appointed by World Bank President George Woods in 1964, and headed by an American economist, Bernard Bell. Over a period of two years, Bell prepared a ten-volume report that recommended extensive liberalising reforms across all economic sectors. For further discussion of the Bell Mission, see Denoon (1986 Denoon, D. B.H. 1986. Devaluation under pressure: India, Indonesia and Ghana, Cambridge: Cambridge University Press. [Google Scholar]: 25–53). The group included Indira Gandhi's Food Minister, C. Subramaniam and her Planning Minister, Ashoka Mehta, along with senior bureaucrats such as M.S. Swaminathan, I.G. Patel, L.K. Jha, S. Bhootalingam and V.K. Ramaswami. Lewis indicates that the now-eminent neoclassical economists Jagdish Bhagwati and T.N. Srinivasan also played a helpful role – both were working, at this time, in Pitamber Pant's Indian Statistical Institute. 'Intellectually, the makings of reform largely existed within the country', Lewis writes (1997: 78), 'but they needed to be catalysed'. Many of these proponents of economic liberalisation had gained ground '[d]uring the brief twenty months of [Lal Bahadur] Shastri's tenure', in which, 'the key pillars of Nehru's strategy of self-reliant growth and social transformation through expansion of basic and heavy industries in the public sector, and land reforms and cooperative reorganisation in agriculture, were virtually overturned' (Frankel 1978 Frankel, F. 1978. India's political economy, 1947–1977, Princeton, NJ: Princeton University Press. [Google Scholar]: 246). Krishnamachari, who had held the same portfolio under Jawaharlal Nehru, reported the details of the matter to his friend, Communist Party of India (CPI) member Bhupesh Gupta, who later recounted these in Parliament. See Sundaram (1972 Sundaram, K. 1972. Political Response to the 1966 Devaluation II – Politicians and Parties. Economic and Political Weekly, 9 September 1889 [Google Scholar]: 1889). Lewis (1997: 160) points out that the 'donors' 'strengthening of a faction may threaten to saddle the latter with a political burden it can ill afford', which is why donors tried to keep their interactions with their allies 'secret'. These individuals certainly saw themselves as comprising a powerful pro-liberalisation group, though not necessarily the 'allies' of donors (that is Lewis's characterisation) – see Jha (1973 Jha, L. K. 1973. "Leaning against open doors". In The World Bank Group, mulitateral aid and the 1970s, Edited by: Lewis, J. P. and Kapur, I. 97–101. Lexington: Lexington Books. [Google Scholar]: 97–101). Initially, the Indian government tried to defend devaluation as an internal decision. For Indira Gandhi's defence of devaluation, see Gandhi (1966) Gandhi, I. 1966. Lok Sabha Debates, 57 columns 2699–705 [Google Scholar]. Robert Komer of the National Security Council is reported to have told Johnson: 'Let's tell the Indians we're not very happy with them either, especially their tendency to take our aid for granted without doing enough to help themselves or to recognize that we're fighting their war [against Chinese aggression] in Vietnam'. As cited in Chaudhry et al. (2004 Chaudhry, P. K., Kelkar, V. L. and Yadav, V. 2004. The Evolution of Home-Grown Conditionality in India. The Journal of Development Studies, 40(6): 59–81. [Taylor & Francis Online], [Web of Science ®] , [Google Scholar]: 61). Short-tethering involved making the release of small instalments of food aid conditional on evidence of India's commitment to agricultural reform as mandated under the Treaty of Rome. Also see Paarlberg (1985) Paarlberg, R. 1985. Food trade and foreign policy: India, the Soviet Union and the United States, 144–57. Ithaca, NY: Cornell University Press. [Crossref] , [Google Scholar]. Indira Gandhi reportedly told her Finance Secretary, I.G. Patel, in 1969: 'For political reasons it has been decided to nationalise the banks. You have to prepare within 24 hours the bill, a note for the cabinet, and a speech for me to make to the nation on the radio tomorrow evening.' Patel was, incidentally, among the 'economic liberals' identified by donors as their allies See Patel 2002 Patel, I. G. 2002. Glimpses of Indian economic policy: an insider's view, Delhi: Oxford University Press. [Google Scholar]: 135. See Kaul (1982) Kaul, T. N. 1982. Indo–US Relations. Sunday, 24 January, p. 21 [Google Scholar]. Kaul, who was India's ambassador to the USA from 1973 to 1977 says that the Soviet Union was 'more sensitive' to Indian interests than were the Americans. The IMF would later recognise that the 'political backlash [against devaluation] which gave reform a bad name … resulted in a fifteen year period before reforms could be tried again'. See Krueger (2003) Krueger, A. 'Maintaining the Momentum: Emerging Market Policy Reform in 2004'. keynote address at the Asia Society Conference 'Investing Across Emerging Markets 2004'. New York 20 November [Google Scholar]; cited in Woods 2006 Woods, N. 2006. The globalizers: the IMF, the World Bank, and their borrowers, Ithaca, NY: Cornell University Press. [Google Scholar]: 73. The only positive achievement of this period, Lewis indicates (1997: 131), was the introduction of a number of agricultural policy reforms that were in line with advice with Subramaniam's group: 'It built a fire under them for agricultural expansion as nothing else could'. Lewis's analysis, along with its instructive tone, is reproduced in his lengthier, co-authored volume on the World Bank's history. See Kapur et al. (1997 Kapur, D., Lewis, J. P. and Webb, S. 1997. The World Bank: its first half century, Washington, DC: Brookings Institution. [Google Scholar]: 293–8, 463–7). In his memoirs, I.G. Patel echoes this sentiment: 'The exercise clearly favoured dictators over democrats who had to think about political support before making promises' (Patel 2002 Patel, I. G. 2002. Glimpses of Indian economic policy: an insider's view, Delhi: Oxford University Press. [Google Scholar]: 127). See also Ruttan (1996) Ruttan, V. 1996. United States development assistance policy: the domestic politics of foreign economic aid, Baltimore, MD: Johns Hopkins Press. [Google Scholar]. One might point out, in this connection, that the Bank's research division produced many notable critiques of conditionality. See Diwan and Husain (1989) Diwan, I. and Husain, I. 1989. Dealing with the debt crisis, Washington, DC: The World Bank. [Google Scholar]. The Nixon administration supported the Pakistani military regime when the latter tried to suppress the movement for national independence in East Pakistan (now Bangladesh). When India endorsed the movement with military aid, the USA sent the nuclear-equipped USS Enterprise into the Bay of Bengal in a bid to threaten the Indian military. Woods (2006 Woods, N. 2006. The globalizers: the IMF, the World Bank, and their borrowers, Ithaca, NY: Cornell University Press. [Google Scholar]: 37) points out that Bank assistance to India actually increased in the early 1970s – at the height of tensions between India and the USA – indicating that '[i]n essence, the World Bank was countervailing US reductions in assistance to India'. The World Bank, in particular, had enjoyed a favourable image. India was one of the few colonies invited to the Bank's preliminary meetings, and one of the original signatories of the agreement that established it as an institution. India was seen to enjoy greater influence within the Bank than any other developing country and was credited as the force behind the creation of its soft-loan window, the International Development Association (IDA). Indeed, when India's First Five-Year Plan (1951–6) acknowledged the need for 'external resources' and stated its preference for aid from 'institutions organised on an international basis', the reference was primarily to the Bank. For details, see Basu (2003 Basu, M. 2003. World Bank lending to the social sector in India, Jawaharalal Nehru University. PhD dissertation [Google Scholar]: 153). At this time, the Indira Gandhi government had seriously considered becoming a member of COMECON, though eventually these plans fell through. See Chandra Sekara Rao (1973) Chandra Sekara Rao, R. V.R. 1973. Indo-Soviet Economic Relations. Asian Survey, 13(8): 793–801. [Crossref], [Web of Science ®] , [Google Scholar]. Some 80 per cent of the funds drawn from the Bank were in the form of long-term concessional loans from the Bank's soft-loan window, the International Development Agency. See Boughton (2001 Boughton, J. M. 2001. Silent revlolution: the International Monetary Fund, 1979–1989, Washington, DC: International Monetary Fund. [Google Scholar]: 709). The EFF was set up to help correct 'structural maladjustments in production and trade' (Azizali 1991 Azizali, F. M. 1991. "Recent evolution of fund conditionality". In International financial policy: essays in honour of Jacques J. Polak, Edited by: Frenkel, J. and Goldstein, M. Washington DC: International Monetary Fund. [Google Scholar]: 246). EFFs provided more money and for longer (up to three years) than the IMF's standby arrangements. To be eligible to apply, a country would have to demonstrate balance-of-payments difficulties as well as structural imbalances. One example was L.K. Jha, who headed the Economic Reforms Commission, was known for his pro-market views and, indeed, was one of the 'economic liberals' identified by Lewis and other donors in the mid 1960s. Three other committees on trade policy reform, financial sector reform and public sector reform were appointed under the directorships of Abid Hussain, M. Narasimham and Arjun Sengupta respectively. In an interview with the author (13 August 2002), Abid Hussain pointed out: 'The very fact that Mrs Gandhi nominated me as chairman was an indication that she wanted a certain kind of [pro-liberalisation] report'. The decision to go to the IMF for a loan was also a signal that the government was prepared for at least some degree of liberalisation, especially since it was I.G. Patel who took the lead in planning India's approach. Like Jha, Patel was seen as a staunch supporter of liberalisation and was known for his association with the economic 'right-wing' of Indian politics and government: H.M. Patel, Lal Bahadur Shastri, Morarji Desai and the economist Jagdish Bhagwati. He, too, was identified by Lewis as an ally in the 1960s. On Indira Gandhi's 'new political and policy orientation', see Kohli (1989 Kohli, A. 1989. The Politics of Economic Liberalization in India. World Development, 17(3): 305–28. [Crossref], [Web of Science ®] , [Google Scholar]: 308). Sengupta (2008) Sengupta, M. 2008. How the State Changed its Mind: Power, Politics and the Origins of India's Market Reforms. Economic and Political Weekly, 43(21): 35–42. [Google Scholar] suggests that Gandhi's reluctance to go for further liberalisation were partly ideological, arising out of her extended relationship with the Left. The immediate reasons behind the decision to approach the IMF were a severe drought, a sharp rise in international oil prices and a generally weak global economy that, together, had led to a deterioration in its balance of payments and an increase in inflation (Ahluwalia 1986 Ahluwalia, M. S. 1986. Balance of Payments Adjustments in India, 1970–71 to 1983–84. World Development, 14(8): 937–62. [Crossref], [Web of Science ®] , [Google Scholar]). Venkataraman (1981) Venkataraman, R. 1981. Lok Sabha Debates, (Government of India), 2 December, 1981, column 338 [Google Scholar] argued that, in fact, India's letter of agreement with the IMF mirrored the objectives stated in the Janata party's preparatory documents for the Sixth Plan (drafted while it was in power). Between 1967 and 1980, India borrowed relatively little from the IMF – small loans that were either unconditional or that demanded only 'minimal policy pre-commitments' (Chaudhry et al. 2004 Chaudhry, P. K., Kelkar, V. L. and Yadav, V. 2004. The Evolution of Home-Grown Conditionality in India. The Journal of Development Studies, 40(6): 59–81. [Taylor & Francis Online], [Web of Science ®] , [Google Scholar]: 6). In the words of one prominent opposition leader: '[The IMF loan consists] of a sell-out of a sovereign body, this Parliament. The sell-out is complete … . Even the budget of this country will be processed by the IMF' (Fernandes 1981 Fernandes, G. 1981. Lok Sabha Debates, (Government of India), 23 November, column 327 [Google Scholar]: column 327). One left-radical critic argued: '[By opting for] the Extended Facility loan with its entire package of "conditionality", [India] deserted the ranks of the poorer countries … . India's decision to go for the loan has certainly set back the Group of 77 in its fight to usher in a less unjust international monetary order' (Mitra (1982 Mitra, A. 1982. One year of the IMF loan. Sunday, 14–20 November [Google Scholar]: 37); Also see Varma (1982 Varma, K. 1982. Rich nations deny even crumbs to developing countries. Sunday, 19–25 September [Google Scholar]: 39); Sau (1982 Sau, R. 1982. IMF and World Bank loans are dangerous for India. Sunday, 8–14 August [Google Scholar]: 51)). The approval of the Indian loan thus became entangled in an internal debate over how far the Fund should go on 'structural' issues. Some members of the US Congress had argued that the programme ought to have been rejected outright because of India's decision to spend US$3 billion on Mirage fighter jets from France. Erd testified before Congress that military spending was a matter of national sovereignty and was outside the purview of the IMF – this was also the IMF's official position (Boughton 2001 Boughton, J. M. 2001. Silent revlolution: the International Monetary Fund, 1979–1989, Washington, DC: International Monetary Fund. [Google Scholar]: 714). Boughton (2001 Boughton, J. M. 2001. Silent revlolution: the International Monetary Fund, 1979–1989, Washington, DC: International Monetary Fund. [Google Scholar]: 715) points out other than 'quietly shift[ing]' to a more flexible exchange rate and gradually devaluing the rupee, India's reform was 'minimal' – there was no privatisation of PSUs [Public Sector Units] and although some quantitative trade barriers were replaced by tariffs, these tariffs were set too high. Finally, though fertiliser prices were raised somewhat, they remained well below economic levels. Despite all of this, the tenor of the discussion at Board meetings remained positive: 'Earlier concerns were outweighed by more and more admiration for the success of the adjustment program'. Indian policy makers were certainly aware of the real reasons behind the canceling of the loan. Thus, I.G. Patel (2002 Patel, I. G. 2002. Glimpses of Indian economic policy: an insider's view, Delhi: Oxford University Press. [Google Scholar]: 120) points out: 'The only reason for not drawing fully upon the very generous assistance obtained from the IMF in 1981 in the wake of the second oil crisis was to escape from the discipline of the IMF'. See Chaudhry et al. (2004 Chaudhry, P. K., Kelkar, V. L. and Yadav, V. 2004. The Evolution of Home-Grown Conditionality in India. The Journal of Development Studies, 40(6): 59–81. [Taylor & Francis Online], [Web of Science ®] , [Google Scholar]: 75–6) for excerpts of the Board's statements. It should be noted that a number of Executive Directors (individually) expressed doubts about the Indian reforms' thoroughness. Sengupta, who was later sent to Washington as India's Executive Director to the IMF Board (1985–7), points out that Larosiere's support for the Indian loan greatly improved the Fund's relationship with the Indian government and that it was also an important milestone in the Fund's deepening involvement in developing countries. The World Bank, under Robert McNamara, provided steady support to India through the loan-approval process (Rudolph and Rudolph (1987 Rudolph, L. I. and Rudolph, S. H. 1987. In pursuit of Lakshmi: the political economy of the Indian state, Chicago: University of Chicago Press. [Google Scholar]: 222)). One prominent journalist, who had previously written several alarmist articles on the subject now reported: 'Apprehension expressed by some of us about the IMF loan, in retrospect, proved to be exaggerated. We thought that India would go down under the IMF Conditionalities. But this country has great resilience' (Varma 1983 Varma, K. 1983. India did not Kneel before the IMF. Sunday, 7–13 August, p. 23 [Google Scholar]: 23). Suman Bery, interview with author, New Delhi, 20 August 2003. Bery is a former World Bank official who inducted into the Indian government as special consultant to the Reserve Bank of India from 1992 to 1994. Boughton (2001 Boughton, J. M. 2001. Silent revlolution: the International Monetary Fund, 1979–1989, Washington, DC: International Monetary Fund. [Google Scholar]: 711) suggests that the 1981 loan is an important landmark in the Fund's institutional development in that it pushed the latter into closer collaboration with the Bank. It was the first instance in which the IMF lent a large sum of money to a developing country for structural reform, not purely stabilisation. India's share in IDA lending dropped steadily through the 1980s see Kapur et al. (1997 Kapur, D., Lewis, J. P. and Webb, S. 1997. The World Bank: its first half century, Washington, DC: Brookings Institution. [Google Scholar]: 1105). One might point to complaints in the press that the Bank had access to sensitive government data that were normally not available to members of parliament. See Nayar (1981) Nayar, K. 1981. Eleven Steps to IMF Temple. Sunday, : 8–9. 13 September [Google Scholar]. One may point, to the following: Shankar Acharya (PhD, Harvard), who served as an advisor in Finance in the mid to late 1980s; Rakesh Mohan (PhD, Princeton University), who served as an advisor in Industry; Arvind Virmani (PhD, Harvard University) who served as an advisor in the Planning Commission; and Jayanta Roy (PhD, Berkeley University), who served as an advisor in Commerce. All four men had worked in the World Bank prior to their jobs in Delhi. As suggested below, these former Bank officials were the BWIs' allies in their operationalisation of 'soft sell' in the 1980s. The induction of these men most likely owed to the awareness among policy elites in the early 1980s that India would have to negotiate future loans with the BWIs on progressively tougher terms. Having domestic officials who were comfortable with the style and language of the Bank was probably thought to be an advantage. Given the spike in the sense of India's power and autonomy that resulted from the
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