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YOU can tell when a government in Pakistan has lost the plot when they turn to the bureaucrats for ideas on how to make change happen.
There are usually many other markers for this loss of the plot, but once the bureaucrats are in charge of generating the ideas which inform the government’s agenda for change, you can say pretty clearly that the gig is up and they have gone into treading water mode.
For this government, that point was reached a few months ago, and evidence was the changes they were trying to bring in the power sector as well as the tax system, which I have written about earlier. People asked me why I was singling out the bureaucrats for the lack of change in Pakistan’s economic management, since it is a common understanding that bureaucrats are responsible for running and safeguarding the system and not changing it. I used to think this too, until more recently I learned from a cursory study of India’s economic reforms that this perception is not true.
India’s economic reforms began with the bureaucrats. I was surprised to learn this myself. The best source for the origins of these reforms is Montek Ahluwalia’s book titled Backstage: The Story Behind India’s High Growth Years.
In the book, Ahluwalia notes that in the mid-1980s, as India’s economy stagnated while those of Southeast Asia raced ahead, “there were no voices in India advocating or demanding change — not civil servants, not academics, not the press and not even Indian industry. They all knew the public sector was performing very poorly and soaking up a lot of resources instead of generating surpluses for investment, but they saw the solution as pushing government to somehow make the public sector more efficient.”
In every area, he notes how economic stagnation was mirrored in a stagnation in the economic conversation. Poor export performance was not seen as a consequence of the import substitution strategy for growth that India had followed from the beginning. “That strategy raised the domestic cost structure and created an environment in which businesses would lobby for more protection from import competition rather than strive to lower costs to build export competitiveness.”
It was the likes of Ahluwalia who recognised that the economic strategy would have to change, away from ‘import substitution’ towards liberalisation.
Sounds familiar? When a government is irrevocably wedded to a losing economic strategy, it leads to rising domestic cost structure, eroding competitiveness of its export base, and less and less investment in productive capacity as resources are eaten up by a bloated and inefficient public sector.
In times such as these, those without a vision make an obsession out of things like finding the resources with which to pay for the public sector’s bills, of using the reserves to manage the exchange rate, or using state subsidies to compensate the private sector for the rising costs such a losing strategy will inevitably bring, of boosting exports with more public support rather than productivity enhancing investments, and so on.
This is where India stood in the mid-1980s, and it was the likes of Ahluwalia who recognised that the entire economic strategy would have to change away from ‘import substitution’ towards liberalisation. It began, according to him, as a short 34-page paper titled Restructuring India’s Industrial, Trade and Fiscal Policies, which came to be known as the ‘M Document’. The paper brought together ideas that were already under discussion between Ahluwalia and his colleagues in the Indian Civil Service, but they were put down in paper form in June 1990 at the request of then prime minister V.P. Singh.
The ideas in the paper had already been debated around the drafting of the Eighth Five-Year Plan, and met with harsh criticism. The old guard of the Congress party were wedded to maintaining a central role for the state, pursuing ‘self-reliance’ in all areas as the objective of economic policy, and job creation as the primary aim to safeguard.
The ideas represented by Ahluwalia were described as “intolerable interference by top bureaucrats who were seeking to scuttle the very process of planning for a self-reliant economy at the behest of Western powers, international monetary bodies and other vested interests” by some members of the Planning Commission, who were still wedded to the old ways of thinking.
The book details how Ahluwalia and a group of his colleagues overcame the resistance within the civil service, within the Congress party, and succeeded in persuading the prime minister to adopt a strategic change in the nature of India’s economic governance. The key moment came in June 1990, when he was asked by then prime minister V.P. Singh to put his ideas down on paper, and forwarded the famous ‘M Document’ to a committee of secretaries, chaired by the cabinet secretary, for an inter-ministerial discussion.
Ahluwalia lists in detail where the ideas found traction, and where they generated opposition. Trade liberalisation was harder for the government to accept due to the balance-of-payment’s constraints of the time, but industrial decontrol found easier acceptance. Along the way, one thing worth noting is the key role played by civil servants in debating the ideas, in accepting them or modifying their contents, and in carrying them back to their respective ministers. The fact that there was ownership at the PMO, where Ahluwalia was employed, helped in giving them impetus. But the civil servants are seen throughout the book, playing a key role in ushering them along.
Once they began to be implemented, the liberalisation generated opposition from industry. The books again shows how steadfast support from the civil servants was able to overcome this opposition, how successive prime ministers were able to stand in the face of industry opposition and urge new thinking upon India’s captains of industry rather than capitulating before their demands.
Civil servants can play a key role in spurring change, if they are so inclined. They can give new thinking the continuity it needs to survive changes of government. But before they can do any of this, they have to want the change, to see the imperative, and navigate the way.
The writer is a business and economy journalist.
Published in Dawn, April 3rd, 2025
