Rewind: The Crisis That Liberated India Economically

The Logical Indian

May 7th, 2016 / 4:20 PM

Image Courtesy: ibtimes | persons-info

It was 1991, China’s economy was growing at its fastest pace ever and India was facing a crisis situation that was unprecedented. The crisis was that India had only that much foreign exchange reserves that could pay for one week of imports. India had to pledge its gold reserves to secure a loan from International banks. The incidents that ensued, the actions were taken, the people who intervened would change the course of India’s economic history forever.
In the mid-1980’s India was beginning to face a Balance of Payment crisis. The balance of Payment is all external transactions of a country, it represents a summation of country’s current demand and supply of the claims on foreign currencies and of foreign claims on its currency. With 1.2 Billions of dollars in its reserves, India had enough money to pay for one week of its imports. The incumbent Chandrasekar government had to airlift gold to England and Bank of Switzerland to secure a short term loan, much to criticism from the people of India. The fall of Chandrasekar government was followed by the rise of Narasimha Rao, who had appointed Dr. Manmohan Singh as the finance minister to ensure India overcame the crisis. Manmohan Singh eventually took up the reform measures that was mandated as part of the deal to secure a loan from the IMF. Manmohan Singh put in place the reforms that would not only secure the loans for resolving the balance of payments but eventually form the basis of high economic growth that ensued in the late nineties and the first decade of the 21st century.

Fallout of the BOP crisis

Manmohan Singh had to face the flak for ‘liberalizing’ the Indian economy. The media had flayed Dr. Manmohan Singh for the reforms which were later cited as the reason for rising inequality besides reduced expenditure on health and education. The debate is still ongoing as to how liberalization has benefitted India for the good and bad. What is certain is the crisis had to be averted and India had very little or no option but to fall in line with terms set by the financial institutions that lent money to India.

Contributors

Written by :

Edited by :

Related Stories

West Bengal EWS Quota

WB Govt Announces 10% Quota For Economically Weaker Sections In Govt Jobs & Education

India’s Healthcare Crisis: Country Facing Shortage Of 6 Lakh Doctors, 20 Lakh Nurses, Finds Study

Railway Job Posts

Indian Railways To Hire 2.3 Lakh Employees Over Next Two Years, 10% Posts For Economically Weaker Sections

Reservation Economically Backward Upper Caste

Modi Govt Approves 10% Reservation For Economically Poor Upper Castes

Waste Crisis

India Is Facing A Seemingly Insurmountable Waste Crisis; Two Innovative Enterprises Are Transforming How We Tackle It

India Suffering From Worst Water Crisis In Its History: Niti Ayog Report

Latest on The Logical Indian

News

Hindu Priest Attacked Near A Temple In New York’s Queens Area; One Arrested

Get Inspired

Power Of RTI: Five Times Right To Information Act Helped Unearth Major Scams

News

Men Are Migrating For Marriage More Than Ever, Figure Doubles In The Last Decade

News

Nirbhaya Rapist’s Photo Appears On Poll Hoarding, EC Issues Notice To Punjab CEO

News

Health Ministry Bans Use Of Antibiotic Colistin For Animal Food Industry

News

First In India: Andhra Pradesh To Reserve 75% Private Jobs For Locals

x

Stories that deserve attention, delivered to your inbox!

Handpicked, newsworthy stories which deserve the attention of a rational generation.