May 21, 2001



Top 10 Colleges
Of India

As admission time approaches, students face the dilemma of making a choice from among the 10,000-odd colleges. INDIA TODAY-Gallup's fifth survey ranks the centres of excellence on key factors. The best in Arts, Science, Commerce, Law, Medicine and Engineering.



Foreign Policy Privatised
Leaked letters in London imply that Brajesh Mishra, principal secretary to the prime minister, trusted the Hindujas more than the Indian High Commission. The brothers even negotiated with Prime Minister Tony Blair on CTBT.



The Heat Is On
The Raja of Bihar is in trouble again. The CBI has filed yet another chargesheet against him in the multi-crore fodder scam, this time in Jharkhand. A non-bailable arrest warrant issued against him has Laloo in a panic.



Fuzzy Logic
Key nations, including India, are briefed by aides of Bush on the new nuclear doctrine he proposes, but find that there are more questions than answers.



Consumed By Hunger
Maharashtra has a surfeit of foodgrain. Yet, over 500 infants have died in Nandurbar district since January this year of malnutrition and related complications.





Mahathir's Mantra

Malaysia's politics is messy but its economic performance has many lessons

Atal Bihari Vajpayee is in Malaysia for four days beginning May 13. The south-east Asian country has a population the size of Haryana, of which roughly 8 per cent is of Indian origin. Although he hates it being mentioned, Malaysian Prime Minister Mahathir Mohamad's grandfather came from Kerala. Mahathir is a great champion of indigenous Malay interests. The word used to describe his strong pro-Malay policies is bhumiputra-pure Sanskrit for sons of the soil.

Malaysia played an important role in triggering a new economic thinking in India in 1990. In the first week of June that year, our then prime minister V.P. Singh went to Kuala Lumpur for a Commonwealth Heads of Government meeting. After this visit, Singh confessed to his aides that he had been stunned by the progress in Malaysia since his previous trip there in 1974 as deputy minister of commerce. Malaysia has generally been known mainly as a commodities producer with a global presence in tin and palm oil. What impressed Singh apart from the urban renewal in Kuala Lumpur was how Malaysia became a major exporter of electronics, emerged as a major producer of crude oil and natural gas and attracted huge foreign investment in manufacturing.

Singh asked his economic adviser Montek Singh Ahluwalia to prepare a paper on economic policies that would help India emulate Malaysia's spectacular success. Singh did not know this but along with Suresh Tendulkar, another distinguished Indian economist, Ahluwalia had advised the Malaysian government in the early 1970s as part of a World Bank team. Ahluwalia's paper, prepared in June 1990 and later referred to in the press as the "M" document, was a comprehensive blueprint for liberalisation. It was discussed extensively but political instability prevented its implementation. The 1991 economic reforms derived much inspiration from it.

Malaysia is of significant interest to economists for another reason. In mid-1997, when after almost two decades of over 7 per cent growth in per capita income east Asia began collapsing, Thailand, Indonesia and South Korea went to the International Monetary Fund (IMF) for emergency bail-out packages in quick succession-Thailand in July-August 1997, Indonesia in October-November and South Korea in November-December. However, Malaysia did not go to the IMF. But under the then deputy prime minister Anwar Ibrahim, elements of the orthodox IMF prescription were introduced-the IMF package without the IMF as it came to be called. Interest rates were raised to stem the depreciation of the ringgit. Drastic cuts in government spending and on imports were announced and tight measures to regulate Malaysia's banks were introduced. But all this failed to control capital flight, reduce interest rates and bolster investor confidence.

It was against this background that on September 1, 1998, Mahathir abandoned Ibrahim's IMF-style policies and announced sweeping controls on both capital inflows and outflows to end speculation against the ringgit. He also moved swiftly to fix the exchange rate, cut interest rates and restore government spending. There is an "impossible trinity" in macro-economics which states that a country cannot simultaneously achieve independence of monetary policy, exchange-rate stability and full capital mobility. At most, a country can achieve any two of these objectives. By giving up capital mobility, Malaysia sought to achieve exchange-rate stability and monetary independence. Mahathir also had non-economic reasons for his new economic policies: by then he was at war with his one-time protege Ibrahim and also because of his nexus with Malaysian companies.

Mahathir's package caused a furore. The only mainstream economist who supported him was Paul Krugman of MIT, who lauded his policies in an article published in Fortune magazine in September 1998. After a disastrous 1998, the east Asian economies have recovered. A recent research paper, "Did the Malaysian Capital Controls Work?", by two Harvard economists Ethan Kaplan and Dani Rodrik and published by the National Bureau of Economic Research concludes that compared to the performance of Thailand, South Korea and Indonesia while they were undergoing IMF programmes, Malaysia's non-IMF policies produced faster economic recovery, lower inflation, smaller declines in employment and inflation-adjusted wages and a more rapid turnaround in the stock market.

The wheel has turned full circle. On July 1, Ahluwalia will take over as the IMF's first independent evaluator, reporting to the organisation's board directly. And among his first tasks will be to pronounce on how effective the IMF was in east Asia and what lessons the Malaysian experience with capital controls has for the future.

(The author is with the Congress party. These are his personal views.)

Care Today


Summer Of 2001
Flippant and elusive, he can best be described by what he is not. Meet
Bryn Adams in an uncharacteristically forthcoming mood.


Looking Glass

Delhi Concert:
"United for Gujarat"

Mumbai Ceramics:
Zareen Mistry

Mumbai Club Music:
Melting Pot


    Web Exclusives
  Human misery always makes for a good story. But as INDIA TODAY Special Correspondent
Sheela Raval discovers in poverty-stricken Nandurbar, it's of little use if it doesn't touch hearts and help bring about change in

Consumed By Hunger



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