In June 1991, India stood on the brink of an economic crisis. Amid soaring inflation, dwindling foreign exchange reserves, and mounting debt, the country desperately needed a transformative leader. This is when an unexpected call changed the course of India’s economic future. Dr. Manmohan Singh, a noted economist and then chairman of the University Grants Commission (UGC), was appointed as the finance minister by Prime Minister PV Narasimha Rao. The appointment would mark the beginning of a new era in India’s economic history.
Manmohan Singh: The Call That Changed Everything
It was a quiet night in June 1991 when Manmohan Singh returned to Delhi after attending a conference in the Netherlands. Exhausted, he had gone to bed when a phone call came through. Singh’s son-in-law, Vijay Tankha, answered the call. On the other end was PC Alexander, a close aide to PV Narasimha Rao. Alexander urged Tankha to wake Singh, as the matter was urgent.
Within hours, Singh met Alexander, who revealed Rao’s intention to appoint him as finance minister. Initially, Singh, who had no political experience, did not take the offer seriously. However, Rao’s resolve was unshaken. On June 21, Singh, still in his UGC office, was asked to return home, get dressed, and attend the swearing-in ceremony.
“Everybody was surprised to see me as a member of the new team lined up to take the oath of office. My portfolio was allotted later, but I was told straight away by Narasimha Rao ji that I was going to be finance minister,” Singh recalled in the book Strictly Personal, Manmohan & Gursharan, written by his daughter Daman Singh.
A Nation in Crisis
At the time, India’s economy was in dire straits. Foreign exchange reserves had plummeted to just ₹2,500 crore, barely enough to cover two weeks of imports. Inflation had reached double digits, with the wholesale price index rising by 12.1% and the consumer price index by 13.6%. Global banks were reluctant to lend, and the government faced mounting fiscal pressures.
Dr. Manmohan Singh’s Reforms That Changed Everything
Despite the challenges, Singh’s expertise as an economist prepared him to tackle the crisis head-on. Within days of moving into the North Block, he began implementing sweeping reforms with the backing of Narasimha Rao. Working closely with then RBI deputy governor C Rangarajan, Singh devalued the rupee to boost exports. He collaborated with P Chidambaram, the commerce minister, to remove export controls and liberalize trade policies.
On July 24, 1991, Singh presented his first budget, signaling the end of the Licence Raj—an era characterized by excessive government control and red tape. Hours before the budget, the Rao government introduced a new industrial policy in Parliament. Based on a document prepared by economic adviser Rakesh Mohan, the policy undertook industrial delicensing in all but 18 sectors and allowed foreign direct investment in 34 industries. Public sector monopolies were dismantled, and disinvestment in state-run companies began.
Singh’s reforms extended to the financial sector. His budget established the Securities and Exchange Board of India (SEBI) to regulate the stock market and announced a committee under RBI governor M Narasimham to restructure the financial system. The focus on fiscal consolidation also aimed to reduce wasteful government spending.
Manmohan Singh Addressing Inflation and Public Concerns
In his 1991 budget speech, Singh acknowledged the severe inflationary pressures affecting the common people. “The price situation, which is of immediate concern to the vast mass of our people, poses a serious problem as inflation has reached a double-digit level. During the fiscal year ending March 31st 1991, the wholesale price index registered an increase of 12.1%, while the consumer price index registered an increase of 13.6%,” he said, highlighting the impact on essential commodities.
Singh’s reforms restored confidence in the Indian economy and earned global recognition. However, not everyone was on board. The “Bombay Club,” a group of industrialists, opposed the liberalization, fearing increased foreign competition. Despite such resistance, Singh’s vision and Rao’s political support ensured the reforms stayed on track.
