Recent disclosures have, for the first time, brought out the full extent of the rupee-rouble scam which dominated the economic regime shift during the early nineties, at the start of the liberalisation process presided over by the then Finance Minister Manmohan Singh. Preparing to breakaway from the P.V. Narasimha Rao-led Congress government, Shri Arjun Singh had alleged in his historic Bhopal rally that the Narasimha Rao government was embroiled in scams and misappropriation to the tune of Rs. 80,000 crore. While this was reported in the media, it was not taken seriously, because the Indian masses did not believe that a fraud of such enormous magnitude was possible. In retrospect, it appears that the charges levelled by Shri Arjun Singh were wholly correct.
Understanding the new methodology of scams, which began during Dr Manmohan Singh'sfirst political tenure as Finance Minister of India, has become important because of the increasing regularity with which this method is being applied. The method involves effecting a regime change in the economic sphere. At the time of regime changes, there is greater tolerance for procedural irregularities in the name of incompatibility between succeeding regimes. This tolerance is used to systematically indulge in irregularities which are purported to be insignificant, but instead drain the national treasury of tens of thousands of crores of rupees. The secrecy surrounding these irregularities only makes the decision-makers? intent even more suspect.
The demise of the Union of Soviet Socialist Republics on 8 December 1991 led to upheavals across the world. The Soviet Union and its successors paid the price of the regime change. The economic cost of this regime change was borne almost entirely by constituents of that once great country. Not ally or protectorate was asked to share the burden of the collapse, not Cuba, not Poland, not Czechoslovakia, nor Yugoslavia. Only India volunteered to share the burden.
Strangely, the burden of the Soviet collapse, as shared by India, did not end up in Moscow; most of it ended up in numbered accounts in Switzerland. So did we share the burden of the Soviet collapse with that once friendly nation: obviously not. But we did share substantial proceeds out of the Indian GDP and government revenue in this guise. The question is, whom did we share this booty of tens of thousands of crores with? Were these merely book operations? In straight words, how many of these operations were phony operations? Worse, how many times were these real and phony operations inflated at the time of settling the bills? How was this scam rationalised inside government decision-making circles? And finally, who was the mastermind behind this loot of the Indian exchequer?
The whole story rests on the dual pricing of the rouble in India, even though this practice was given up elsewhere in the world after the collapse of the Soviet Union and Russia'sassimilation in the comity of free world economies.
When the Soviet polity collapsed, its economy and financial system also crashed. Not only were the Russians forced to correct the international value of their currency, they also had to contend with galloping inflation the like of which the world had never seen before, not even in the famed economic history book renderings of German inflation during and between the World Wars.
Soviet Union had been a major international player who had extended debts to various East Bloc and other friendly countries, including Cuba, Poland, India, et al. As their currency'sexchange rate collapsed to 1/5000th its value and even further to 1/15000th of its pre-December 1991 value, its international loan portfolio was accordingly revalued. Rather than collect a pittance compared to the original debt value, the successor state of the Soviet Union, viz the Commonwealth of Independent States, decided to write off the entire rouble debt. Thus the debt to Poland, Cuba and a host of other countries was written off.
At that point of time, India had the option of settling the entire Russian debt for a then current exchange rate determined total value of around 23 crore rupees. We did not do so. Even as great economist Dr Manmohan Singh presided over the Finance Ministry, we voluntarily offered to revalue the rouble debt. Instead of then current value of 23 crore we agreed to pay back the revalued debt in installments over several years in staggered installments. We ended up paying tens of thousands of crores out of the notional Vostro escrow accounts in the Reserve Bank of India.
Understanding this phenomenon is key to understanding how a significant part of the Indian GDP is creamed off by the top by corrupt Indian politicians, bureaucrats, businessmen and their foreign accomplices.
(To be continued)