Crisis of 1991 Essay

3584 Words Sep 24th, 2014 15 Pages
1991 Indian economic crisis
By 1985, India had started having balance of payments problems. By the end of 1990, it was in a serious economic crisis. The government was close to default, its central bank had refused new credit and foreign exchange reserves had been reduced to such a point that India could barely finance three weeks’ worth of imports which lead the Indian government to airlift national gold reserves as a pledge to the International Monetary Fund (IMF) in exchange for a loan to cover balance of payment debts
With India’s foreign exchange reserves at $1.2 billion in January 1991[2][3][4] and depleted by half by June,[4] barely enough to last for roughly 3 weeks of essential imports,[3][5] India was only weeks way
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Although, most of these reforms came because IMF required those reforms as a condition for loaning money to India in order to overcome the crisis. There were significant opposition to such reforms, suggesting they are an "interference with India's autonomy". Then Prime Minister Rao's speech a week after he took office highlighted the necessity for reforms, as New York Times reported, "Mr. Rao, who was sworn in as Prime Minister last week, has already sent a signal to the nation—as well as the I.M.F.—that India faced no "soft options" and must open the door to foreign investment, reduce red tape that often cripples initiative and streamline industrial policy. Mr. Rao made his comments in a speech to the nation Saturday night." [11] The foreign reserves started picking up with the onset of the liberalisation policies and peaked to $314.61 billion at the end of May 2008.[12]
A program of economic policy reform has since been put in place which has yielded very satisfactory results so far. While much still remains on the unfinished reform agenda, the prospects of macro stability and growth are indeed encouraging.
Economic problems in 2012 led to comparisons to the 1991 crisis in various media outlet
A look at Indian economy as it faced one of its worst financial crisis since independence.
In India, 1991 is known as the watershed year. This is the year when

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