1991 was the beginning of a new decade and also the beginning of many historic happenings. The Soviet Union-led left bloc was crumbling, which would eventually breathe its last, later that year. India was in the middle of an economic crisis that chained the Asian giant, clutching its legs of progress, barely 44 years after independence.
1991: The Crisis of Crisis
The country had a total foreign exchange reserve of USD 1.2 billion.
As the year progressed, the government did not even have enough resources for 3 weeks worth of import payments. It was here that the newly appointed foreign minister took charge on 21 June 1991.
The Indian government swung into action and asked the International Monetary Fund or IMF for an emergency loan of USD 2.2 billion. The IMF’s hand of help and assistance comes with its own caveats. The condition here was oriented in reforms.
India was a closed economy, as though an island locked away from any movement. This model worked for a newly independent country, but time had passed, and change had to come.
Opening Up To Growth
And this when the lightening of change and reform entered the subcontinent. Manmohan Singh, a seasoned economist who was the country’s banker, ie the RBI governor before took the mantle to bring in the change, that was the need of the hour.
Against the charge of the tide, reforms were forced in. The Rupee was devalued, and several of the restrictions in doing business were dropped.
The cash reserve ratio (CRR) dropped from 25 per cent to 10 per cent. In addition, the statutory liquidity ratio (SLR) was lowered from 38.5 per cent to 25 per cent.
What was in store, after Manmohan Singh’s historic budget was a growth surge, when China was only pacing itself and Japan was beginning to see an end to its story of growth. This reform took the Indian Economy from being an economy worth USD 266 billion in 1991 to close to 4 trillion in 2024.
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The Macro Miracle
Singh went against a force that was rigid and was necessarily ready to usher into a period of change. This saw a surge in the Indian equity market and entry of many important private and foreign players who found a new market in the country with 800 million people (in 1991).
The economic reform and liberalisation are usually seen as Manmohan Singh’s landmark and milestone moment of his career. However, his stint as the 15th RBI governor is often forgotten; he was the RBI chief from 1982 to 1985.
This was the time, when the economy had started showing signs of unravelling, and Singh was at the helm of the monetary half of the economy.
The Stocks That Rose
The Indian markets which only had legacy of being the oldest markets in Asia are today one of the most sought-after investment avenues. In 1991, the the Bombay Stock Exchange’s Sensex stood at around 1000 points. Today, after over 30 years since the liberalisation, the Sensex has crossed the milestone of 80,000 points.
BSE-listed Companies Market Cap Hits $5 Trillion Mark For First Time | Representative Image
It was post the much talked about liberalisation that the new-age NSE or National Stock Exchange and its Nifty index was established in 1994. Today, the Nifty 50 stands at around 25,000 points. Earlier in 2024, the market capitalisation of Indian markets crossed USD 5 trillion.
The Economy
India’s GPD grew from being the 17th largest economy in the world, with a meagre USD 266 billion, to being close USD 3.8 trillion in 2024.
Indian GDP per capita, that is the contribution of each individual to the Gross Domestic Product of the economy, also rose in the time period. It rose from around USD 303 to USD 2,484.85.
During his term as the prime minister of the country that the country’s GDP per capita grew from USD 624.11 to USD 1,559.86 in 2014.
MGNREGA
The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 or MGNREGA or ‘Manrega’ was another scheme that came to pass during the UPA-I regime under PM Singh. This scheme’s fundamental philosophy lies in the concept of right to work and earn a living.
This scheme chartered a different form of Direct Benefit Scheme, along with opening avenues of future employment with exposure.
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As per this welfare and employment scheme, individuals in rural India will be able assured of 100 days of employment in a year, and the government would reimburse them with wages for their job.
This scheme chartered a different form of the Direct Benefit Scheme, along with opening avenues of future employment with exposure.
The scheme has under lot of criticism over the years, but it has continued to receive greater allocation from the government, signalling its rising demand and success in providing a living.
