This Day In 1991, India Brought Economic Reforms. Who Was Behind Them?
This article recounts the 1991 Indian economic crisis, where the government was forced to pledge gold reserves to secure emergency loans. These events paved the way for Finance Minister Manmohan Singh to introduce sweeping economic reforms that liberalized the Indian economy.
Why it matters
The 1991 reforms are considered a watershed moment in Indian history, marking the transition from a closed economy to a globalized market-oriented system.
India had three weeks of money left.That's not a metaphor. By June 1991, foreign exchange reserves had fallen to around Rs 2,400 crore -- barely enough to cover three weeks of imports. Inflation was running above 13 per cent. Oil prices had spiked after Iraq invaded Kuwait in August 1990. Remittances from Indian workers in the Gulf, a major source of foreign currency, dried up. Credit rating agencies downgraded India's sovereign debt, which shut the door on fresh commercial borrowing just when the country needed it most. To make matters worse, the country saw three prime ministers in under two years -- V.P. Singh, Chandra Shekhar, and finally PV Narasimha Rao - leaving little room for stable decision-making.And then, the then-government did something it had never done before.
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