The Birth of India's Growth Story: Liberalisation
The Birth of India's Growth Story: Liberalisation
The birth of India's economic liberalisation can be traced back to the 1990s. It was on 24 July, 1991 that India's finance minister, Manmohan Singh laid the foundations of the liberalisation process that paved the way for India's growth and development. Following its independence in 1947, a socialist policy was followed. Despite attempts to liberalise the economy in 1966 and 1985, no success had been forthcoming.
The first attempt was strongly resisted in 1967. The second major attempt was made in 1985, but it was halted in 1987. A crisis is what precipitated the situation and brought about a financial emergency which only liberalisation could cure. Indian was struck with a balance of payment crisis whereupon it had to pledge over 20 tonnes of gold to the Union Bank of Switzerland and around 47 tonnes to the Bank of England. This was in response to the bailout deal with the IMF (International Monetary Fund).
The IMF also needed structural economic reforms. Under the initiative of our finance minister, the beginning chapters of India's growth story were written. Innovative reforms wre implemented by him at the time when P. V. Narasimha Rao was the PM. The reforms which were implemented were so innovative that they galvanised India's economic growth. Doors were opened for international trade and investment, entry of privatization, tax reforms, and deregulation. License raj was abolished and steps were taken to control inflation and promote investment. The reforms of 1991 were sustainable and the fruits of the liberalisation process reaped rich dividends in 2007 when India had the highest growth rate of 9%.
In those times, India was the leader next to China in terms of being the fastest growing economy in the world. As the finance minister in charge, it was Manmohan Singh who made reforms in India a reality. An accomplished economist, he has also been the Governor of RBI from 1982 to 1985.
In 1991, when he became the finance ministry, India was facing a massive economic crisis. Our nation had a fiscal deficit of close to 8.5% of the GDP. The current account deficit was close to 3.5% of GDP. No international lenders were willing to finance it. India had just a billion dollars of foriegn exchange reserves. Manmohan Singh started the economic restructuring of the nation. By 1994, he had delivered a historic budget that changed the manner in which economy and economic growth was viewed in the country.
As a leader who had the vision to take on the challenges in the face of imminent collapse, he has played an important role in India's growth and development. He initiated a credible structural adjustment which embodies the innovation and entrepeneurial spirit of India now.
As his term as PM draws to the close, he will be remembered for the many efforts he made to further India's growth story. Leaders from rival parties have also appreciated his integrity and committment to India. As India moves to the era of coalition politics and regional factors, and the country waits for the outcome of the general elections of 2014, one does take the time to remember all about India's growth story and how it all began. Maybe there are many changes and transitions ahead, but these should be seen as challenges, not obstacles. Only then can India's growth story progress further.
