- Anonymous1 decade agoFavourite answer
In 1991 our foreign exchange reserve was only 1 billion doller of Import ,GDP growth was standstill ,economy was in sambles ,No private entrepreneurs were allowed to enter in GOV controlled Industries .India needed desperately developments in all sectors .License raj was controlling our all growth .Capacity enhansements in all core sectors were stoped .Our Gold was put to security to foreign countries for money to save India .America was about to kill economically .No jobs,no telephone,no housing ,virtually no decvelopment .Our present PM Dr Manmohan Singh was FM in 1991 and amids lot of criticism with in party and opposition ,Dr Singh with great support of late PM P.V.Narsimha Rao even against the wishes of Sonia Gandhi ,Chidambaram presented a great budget of economic liberisation .This liberisation was duly supported by the then opposition leader ,another great man Atal Behari Bajpai of BJP .With in 4 years of liberisation Indian foreign exchange reserve rose to 140 billion doller ,Private entrepreneurship started coming up in a big way in Steel,IT ,Roads,infrastructures,housing,telephone and so many sectors and created a base for further developments .Now after 17 years of liberisation ,you can see the developments in all the sectors where every 5 men in India 3 have mobile phone ,300 doller foreign exchange reserve ,GDP growth is 9 % per annum .Despite world recession ,Indian economy stood resolutely against any odd .Only regret is India could not be free from ugly corruption in everywhereSource(s): personal feeling
- ma bLv 51 decade ago
The assassination of prime minister Indira Gandhi in 1984, and later of her son Rajiv Gandhi in 1991, crushed international investor confidence on the economy that was eventually pushed to the brink by the early 1990s.
As of 1991, India still had a fixed exchange rate system, where the rupee was pegged to the value of a basket of currencies of major trading partners. India started having balance of payments problems since 1985, and 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 reduced to the point that India could barely finance three weeks’ worth of imports.
A Balance of Payments crisis in 1991 pushed the country to near bankruptcy. In return for an IMF bailout, gold was transferred to London as collateral, the Rupee devalued and economic reforms were forced upon India. That low point was the catalyst required to transform the economy through badly needed reforms to unshackle the economy. Controls started to be dismantled, tariffs, duties and taxes progressively lowered, state monopolies broken, the economy was opened to trade and investment, private sector enterprise and competition were encouraged and globalisation was slowly embraced. The reforms process continues today and is accepted by all political parties, but the speed is often held hostage by coalition politics and vested interests.
– India Report, Astaire Research
The economic liberalization in India refers to ongoing reforms in India. After Independence in 1947, India adhered to socialist policies. The extensive regulation was sarcastically dubbed as the "Licence Raj"; the slow growth rate was named the "Hindu rate of growth". In the 1980s, the Prime Minister Rajiv Gandhi initiated some reforms. His government was blocked by politics. In 1991, after the International Monetary Fund (IMF) had bailed out the bankrupt state, the government of P. V. Narasimha Rao and his finance minister Manmohan Singh started breakthrough reforms. The new policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalization has since remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labor laws and reducing agricultural subsidies.
As of 2009, about 300 million people — equivalent to the entire population of the entire United States — has escaped extreme poverty. The fruits of liberalization reached their peak in 2007, with India recording its highest GDP growth rate of 9%. With this, India became the second fastest growing major economy in the world, next only to China. An Organisation for Economic Co-operation and Development (OECD) report states that the average growth rate 7.5% will double the average income in a decade, and more reforms would speed up the pace.
Indian government coalitions have been advised to continue liberalization. India grows at slower pace than China.McKinsey states that removing main obstacles "would free India’s economy to grow as fast as China’s, at 10 percent a year".