Manmohan Singh, the visionary economist and statesman who steered India out of one of its darkest financial crises, has passed away at the age of 91. Known as the architect of India’s economic liberalization, Singh’s transformative reforms in 1991 not only rescued the nation from near bankruptcy but also set it on the path to becoming a global economic powerhouse.
The Crisis of 1991
By mid-1991, India faced a crippling financial crisis. The nation’s foreign exchange reserves had dwindled to precarious levels, sufficient to cover only a few weeks of imports. Inflation soared into double digits, and a massive fiscal deficit threatened to destabilize the economy. Against this backdrop, Manmohan Singh, then Finance Minister, took on the herculean task of averting sovereign default.
Backed by Prime Minister P.V. Narasimha Rao, Singh initiated a series of bold reforms to dismantle decades of protectionist policies and lay the groundwork for a liberalized economy.
Decisive Actions By Manmohan Singh to Stabilize the Economy
In July 1991, the government undertook unprecedented measures. The rupee was devalued twice, a step aimed at making Indian exports more competitive and boosting foreign exchange inflows. Simultaneously, the Reserve Bank of India pledged 47 tonnes of gold to international banks, raising $600 million to stabilize reserves. Emergency loans from the International Monetary Fund (IMF), amounting to $2 billion, provided further relief.
However, these immediate steps were only the beginning. On July 24, Singh presented his first Union Budget, which went beyond crisis management to lay out a vision for India’s economic transformation.
Manmohan Singh And Reforms That Redefined India’s Future
The 1991 budget marked the dismantling of the License Raj, a maze of bureaucratic controls that had stifled industrial growth for decades. Restrictions on foreign investment were eased, allowing automatic approvals for up to 51% equity stakes. Industrial licensing requirements were abolished for all but 18 critical sectors, paving the way for private enterprise to thrive.
The reforms also required significant sacrifices. Corporate taxes were increased, subsidies on essential goods like cooking gas and sugar were slashed, and petrol prices were raised. Reflecting on these tough decisions, Singh’s daughter Daman Singh wrote in her biography, Strictly Personal: Manmohan and Gursharan, “He [Rao] also jokingly told me that if things worked well, we would all claim credit, and if things didn’t work out well, I would be sacked.”
Singh’s belief in India’s potential shone through in his budget speech, where he famously declared, “No power on earth can stop an idea whose time has come.”
Sustaining the Reform Momentum
The reforms initiated under the Rao-Singh leadership continued to reshape India’s economy. A new trade policy simplified import-export regulations, while committees led by economists like Raja Chelliah and M. Narasimham introduced structural changes in taxation and financial systems. These measures attracted foreign investment, modernized industries, and laid a strong foundation for long-term economic growth.
The impact was dramatic. Within two years, India’s foreign exchange reserves surged from under $1 billion to over $10 billion, averting economic collapse and solidifying the country’s position as an emerging global player.
Also Read: Dr Manmohan Singh Passes Away At 92, Glimpse Of His Pivotal Decisions During His Tenure
