ECONOMIC LIBERALISATION, 1991- BREAKING THE SHACKLES

In 1990, India faced economic collapse with dwindling forex reserves and mounting debt. The next year, the Narasimha Rao government, with Manmohan Singh as finance minister, launched transformative reforms, dismantling protectionism and reshaping the economy

- BY M.G. ARUN

Everything that could go wrong seemed to be going wrong for India in the year of its transition to the '90s. V.P. Singh's implementation of the Mandal Commission report had ignited an unexpected firestorm in North India, L.K. Advani had embarked on his rath yatra that threatened to inflame communal passion. Unsustainable borrowing and high expenditure had brought the balance of payments (BoP) crisis to a head. The V.P. Singh government that came to power in 1989 had inherited the festering problem from the previous Rajiv Gandhi regime but failed to take corrective action. “He Singh came into government when the foreign exchange reserves were $3.6 billion, or about eight weeks of imports of that year. This was very low by any standard,” Montek Singh Ahluwalia, former deputy chairman of the erstwhile Planning Commission of India, revealed in his book Backstage: The Story Behind India's High Growth Years. “By the time he left in November 1990, the reserves had dropped to $1.9 billion, just over three weeks' worth of imports!”