India at 75: Epochal moments from the 1990s

The Mandal report, the kamandal counter, and economic reforms.

On August 7, 1990, Prime Minister V.P. Singh announced that the Other Backward Classes (OBCs) would get 27 per cent reservation in jobs in Central government services and public sector units. The announcement was based on the recommendations of the Mandal Commission, under the aegis of former Bihar Chief Minister B.P. Mandal, which the Morarji Desai government had constituted in 1979 to address the vexed issue of caste discrimination. The V.P. Singh government’s decision took the total number of reservations for the OBCs, Scheduled Castes and Scheduled Tribes to 49 per cent, thereby stirring a hornet’s nest.

As thousands of students took to the streets, anti-Mandal protests became a defining feature of contemporary politics. It took a gory turn in September 1990 when a Deshbandhu College student, Rajeev Goswami, self-immolated. Though Goswami survived, he became the face of the agitation, and more immolation bids followed soon. The historian Ramachandra Guha puts that number at 200; more than 60 succumbed to their burns.

Students protest in Delhi against the implementation of the Mandal Commission recommendations. | Photo Credit: THE HINDU PHOTO ARCHIVES

The Mandal moment fragmented north Indian voters decisively on caste lines and was the beginning of powerful caste-based regional parties. Two of the immediate protégés of the movement were politicians who had groomed themselves as socialist champions: Lalu Yadav and Mulayam Singh Yadav, adherents of the socialist icon Ram Manohar Lohia. 

The brand of identity politics unleashed by the Mandal moment would create leaders such as Mayawati, who became India’s first female Scheduled Caste Chief Minister in 1995 when she won U.P., and would give a major fillip to the Dalit political voice. To counter this, the BJP unleashed the kamandal edition of politics.

In 1990, the RSS was demanding that the BJP publicly denounce the Mandal Commission report. While the party’s upper caste leaders agreed in private, they could not say it publicly lest it alienate the party’s middle castes.

The VHP was desperate to begin the construction of the Ram temple in Ayodhya and had announced October 30 as the appointed date. It was then that BJP leader Lal Krishna Advani came up with the perfect foil for the Mandal agitation — the kamandal politics of Hindutva. He announced a rath yatra, or chariot procession, of 10,000 kilometres passing through 10 States from Somnath to Ayodhya, between September 25 and October 30.

L.K. Advani begins his Somnath-Ayodhya rath yatra. | Photo Credit: THE HINDU PHOTO ARCHIVES

The air-conditioned Toyota chariot with Advani holding a bow looked straight out of the TV serial Mahabharat, aired just a few years ago, as if in anticipation of this moment. It was surrounded by trishuls and saffron bands and travelled through 600 villages in Gujarat with the assistance of none other than the 40-year-old Narendra Modi. The kind of response that Advani got, with people touching his feet and throwing coins at his chariot, surprised even A.B. Vajpayee, who was not fully in agreement with the yatra. But he conceded that it had touched a chord with people. The yatra was the biggest mass mobilisation of Hindutva forces and would catapult the BJP to political power within a few years. 

Communal violence broke out in parts of north India in the wake of the yatra. On October 22, Advani reached Bihar, then under Lalu Prasad Yadav, and checked into the circuit house in Samastipur. Next morning, Advani was arrested under the National Security Act. He was flown out of the State and later allowed to go free. Hours later, Vajpayee withdrew the BJP’s support to the V.P. Singh government at the Centre. Singh eventually had to step down. In the ensuing elections, the BJP made significant gains. 

The yatra, meanwhile, with 75,000 kar sevaks, had reached Ayodhya. The Janata Dal government in Uttar Pradesh, headed by Mulayam Singh Yadav, relocated 20,000 policemen to protect the Babri Masjid.

On the appointed day, 40,000 kar sevaks gathered at the bridge leading to the old town of Ayodhya. Vajpayee had arrived the day before. The VHP had promised to hold its ceremony in the land next to the masjid, but as feared, kar sevaks scaled the Babri Masjid in an attempt to tear it down. Mulayam Singh ordered his police to fire and several kar sevaks died, but the masjid remained standing. On December 6, 1992, it did not. Sangh Parivar activists and followers illegally demolished the 16th century structure.

Arguably, 1991 was not an ideal period for India to ‘open up’ its economy. There was the looming balance of payments and foreign exchange crisis; inflation had hit a staggering 16.7 per cent in August that year; fiscal deficit was 8.4 per cent; the Soviet Union, India’s long-term ally, had just collapsed; the Gulf region, which was powering up the country’s remittance economy, witnessed a devastating war; and the Congress regime under P.V. Narasimha Rao was a minority government.

That did not deter Rao and his Finance Minister Manmohan Singh from introducing economic reforms that would soon change the colour and character of the country. “No power on earth can stop an idea whose time has come,” Singh quoted Victor Hugo in his Budget speech in July 1991.

As expected, the economic reforms unleashed what many would now call a spectre and others an aiding genie. Very soon, India would see high-growth years. From an average of about 4.4 per cent in the 1970s and a little further in the 1980s, GDP growth started hovering above 5.5 per cent in the 1990s and early 2000s and jumped to 7.1 and upwards of 8 per cent in the next decades. India’s GDP was valued at about $266 billion. As of 2020, before COVID-19 hit the country’s economy, its GDP was inching towards the $3 trillion mark.

At a meeting of the Planning Commission on September 19, 1991, Prime Minister P.V. Narasimha Rao (centre) with Defence Minister Sharad Pawar, Planning Commission Deputy Chairman Pranab Mukherjee, Finance Minister Manmohan Singh and Agriculture Minister Balram Jakhar. | Photo Credit: The Hindu Archives

In hindsight, India’s liberalisation has been a mix of hits and misses. A number of sectors that were under the licence raj, such as automotive or aviation, directly benefited from the reforms. Vehicles became much cheaper, transport became affordable, and access to places improved in general.

The global exposure helped companies attract foreign investors and new technologies. This created avenues for more employment. The service sector boomed, although many economists now say the growth in IT services was not really because of the reforms but because of global advances in technology.

The purchasing power of average Indians improved, from a little over $1,000 to about $6,000 now. Parameters such as infant mortality rates, foreign direct investment, and labour force employment improved significantly.

Today, economists point to some of the negative fallouts. The contribution of farming, which continues to feed more than half of the population, to GDP went downhill during the reform years. The high growth years did not really convert into meaningful growth in jobs, especially in the rural sector and for the urban poor. The focal shift from big capitalists in general in the 1980s and 1990s to a select list of crony capitalists made a handful of Indians very rich, widening the income gap. As of 2020, India’s Gini Coefficient, a measure of income inequality, was 82.3, indicating the rising inequality.

As the reforms also meant more privatisation of public sector companies and increased withdrawal of the state from crucial sectors such as education, health, and priority sector spending, India’s rich got richer, while the poor were robbed of social security and formal jobs.

Overall, it would seem that liberalisation did not lead to greater diversification of the economy nor to labour-intensive activity. Critics also say that it led to environmental destruction, collapse of the welfare state, siphoning off of public money into private hands, stock market scams, and a riot of neoliberal economics.

Even though it wiped out over a third of the market valuation, the securities scam of 1992, popularly known as the Harshad Mehta scam, introduced a bouquet of historic changes.

At a time when banks were not allowed to invest in the market, Mehta convinced complicit banks to send money to his personal account. He used it to buy up large quantities of stocks, drive up the price, and cash out. It created a huge but false stock market boom.

The most important impact of the $1.3-billion market manipulation was that it paved the way for stronger, stricter, and smarter market regulation. The ease with which Mehta sold fake debt securities hand in glove with Bank of Karad and Metropolitan Bank exposed the chinks in the regulatory framework.

Harshad Mehta. | Photo Credit: The Hindu Archives

SEBI or the Securities and Exchange Board of India, the country’s market watchdog, witnessed a massive overhaul. SEBI had come into being in 1988 but had lacked teeth. Now, it was given statutory powers. The SEBI Act was passed, giving it powers over all securities markets, thus ending the fiefdoms of independent stock exchanges owned and operated by brokers.

The second change was collateral. The scam indirectly led to the emergence of electronic trading. The scam was made possible because of the information asymmetry of the old ‘ring trade’ or physical trade, where brokers held immense clout. Trade orders went out to investors unevenly, and brokers could manipulate the process. For instance, reconciliation of trades took time and prices could change by then. The system was so slow the brokers could actually trade without stocks. The Mehta scam ended such malpractices.

Coincidentally, the formation of NSE and the advent of e-trading took the sheen out of Bombay’s stock market. Now anyone could trade from anywhere.

Ironically, the scam also fuelled retail investor interest in the stock market. The media coverage of Mehta made him a star of sorts. And the Big Bull, as many called him, changed the middle-class attitude towards stock trading. Mehta, the son of a small-scale textile businessman, had powered up the BSE’s marquee Sensex index to 10,000 points from around 1,000 points in a year and a half. Many saw this as a great feat. This rekindled interest eventually triggered more scams—from Ketan Parekh to Satyam. The swarm of new investors also led to the now-infamous IPO boom of the mid-90s.

There was one other fallout: The Harshad Mehta scam was among the best researched and most data-heavy investigative reports run by Indian media, and ignited interest in what is today called data journalism.

Mehta was arrested in November 1992 and sentenced to five years rigorous imprisonment. He appealed but died in jail in 2001 of cardiac arrest.

No one could guess that when the S.R. Bommai-led government in Karnataka was dismissed by the President on April 21, 1989, it would lead to one of the most noteworthy decisions of the Supreme Court five years later. Bommai’s government was dismissed on the advice of Karnataka Governor P. Venkatasubbaiah after 19 MLAs had withdrawn their support to Bommai, but events preceding the final order for the imposition of President’s Rule via Article 356 of the Constitution showed that 12 of the 19 MLAs who defected had returned to Bommai’s fold. Thus, Bommai had not lost his majority in the Karnataka Legislative Assembly, but the Congress, which was in power at the Centre, blatantly misused Article 356 to dismiss his elected government.

Bommai went to court against the Governor’s decision to recommend President’s Rule. First he moved the Karnataka High Court, which dismissed his writ petition. Then, with the aggrieved Bommai moving the Supreme Court, a nine-judge Constitution Bench examined the petition. The case took almost five years to see a logical conclusion. On March 11, 1994, a nine-judge Constitution Bench of the Supreme Court delivered its historic verdict on March 11, 1994 (S.R. Bommai v. Union of India).

The key operative part of the judgment stated that the “correct interpretation of the expression in Article 356… is a Constitutional breakdown and impasse. Article 356 cannot be invoked in situations that can be remedied, that do not create an impasse, that do make governance of a State in accordance with the Constitution impossible.”

S.R. Bommai (left) with the Governor P. Venkatasubbiah.  | Photo Credit: The Hindu Archives

Basically, the verdict found that the power of the President to dismiss a State government was not absolute. It declared that the President should exercise the power to dismiss only after a proclamation that he or she issues (imposing his/her rule) is approved by both Houses of Parliament. Till then, the Court said, the President can only suspend the Legislative Assembly by suspending the provisions of the Constitution relating to the Legislative Assembly. “The dissolution of Legislative Assembly is not a matter of course. It should be resorted to only where it is found necessary for achieving the purposes of the Proclamation,” the Court said.

The verdict also categorically ruled that the floor of the Assembly is the only forum that should test the majority of the government of the day, and not the subjective opinion of the Governor, who is often referred to as the agent of the Central government.

The case, which would go on to become one of the most cited whenever hung Assemblies were returned and when political parties scrambled to form a government, in a way put an end to the arbitrary dismissal of State governments under Article 356 by spelling out the restrictions that would apply.

By the time the case began to be heard, elected governments in several other States such as Madhya Pradesh, Rajasthan, Himachal Pradesh, Nagaland and Meghalaya had also been dismissed under the provisions of Article 356. All these petitions were clubbed together under the aegis of the S.R. Bommai case. While the Supreme Court upheld the dismissals of the governments of Rajasthan, Madhya Pradesh, and Himachal Pradesh as it felt that the use of Article 356 was justified in these cases, it invalidated the Union government’s actions in Karnataka, Nagaland, and Meghalaya.

The judgment did not have any immediate substantive impact as all these States had since then elected new governments, but as a long-term consequence, the case put an end to peremptory dismissals of State governments by an antagonistic Centre.

As the 1990s ended, there was panic across the world. The reason was, in a way, funny. The computers that all developed nations were using did not know how to change from 1999 to 2000 because nobody had taught the machines to use more than two digits to denote the year. Now, there would be chaos when the 2000s started because “01” would not necessarily mean “2001”. It was a major bug. They called it the Millennium or Y2K Bug.

It was a super expensive problem; system breakdowns could mean losses of trillions of dollars worldwide. Fixing the Y2K bug meant introducing just one extra line of code but there were too many machines and too little time and too few hands to do it.

IT professionals in Hyderabad. | Photo Credit: The Hindu Archives

As companies and governments scrambled, India came up trumps. It had the manpower—tech-savvy and English-speaking youngsters. In the 1990s, India’s IT services industry was already known for its cheap labour and fast deliveries, making its personnel the cyber-coolies of the world. The Y2K Bug was thus a godsend, and companies like Satyam and TCS seized the moment, marking a turning point in the industry.

After the crisis, low-skill IT jobs continued travelling to India, with Bangalore and Hyderabad emerging as the first beneficiaries of the BPO boom. Soon, the country saw a mushrooming of BPO centres in all cities, including Tier-1 and Tier-2 towns. The huge demand also created an environment of toxic competition and labour abuse. Many activists raised alarms at the way the “electronic sweatshops” were treating workers. Poor wages, erratic hours, unpaid extra work, and non-existent social security benefits became the hallmark of India’s BPO movement. Still, it kept booming, moving an enormous number of poor families into high-income brackets and creating a brand new middle class.

As the IT sector diversified, many big players soon moved to greener pastures. Today, the sector also faces stiff competition from low-cost geographies such as the Philippines and from AI-powered call centre solutions. Yet, the BPO-ITeS industry continues to employ over 4 million people, is expected to create 6 million jobs by 2025, and is likely to become a $8.8 billion industry by 2025.