How the 1991 crisis got India to rethink its economic approach

By early 1991, India’s reserves were nearly gone. The government took a desperate step—it sent 67,000Kg of gold abroad to secure a loan from the IMF.

This was a last-ditch effort to avoid default, but it only bought a little time. But soon, the govt collapsed again, leading to a new election. In June 1991, P.V. Narasimha Rao became Prime Minister, and he chose Manmohan Singh as his Finance Minister— and things changed.

Rao and Singh quickly implemented reforms: they removed restrictive licensing, welcomed foreign investment, and eased machinery imports. The 1991 crisis forced India to rethink its economic approach—it highlighted the risks of heavy borrowing and too much government control. But it also showed that when things get tough, bold decisions can turn a bad situation into an opportunity.

In this episode of the NEON Show, Rajrishi Singhal, a senior journalist, banker, shares his deep insights into India’s economic reforms and financial sector. Singhal offers a nuanced perspective on why India’s economic progress hasn’t met expectations, touching on issues from private sector investment to the success of reforms during coalition governments.

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