Manmohan Singh was an accidental reformer. Make no mistake about it. Here is what happened in 1991.
Manmohan was very much in support of government control of business (pre 1991) era under Indira. He called PSUs “rock solid” foundation for Indian economy. Rajiv Gandhi spent stupendous amounts in public disbursements to ensure electoral victory, but he didn’t get majority and supported coalition govt of Chandrashekhar in 1990.
We had already imbibed the “import substitution strategy” from the start of our independence. Anything needed was imported without due thought given to the effect it will have on economy. No serious thought was made to develop indigenous products or skill development. Maybe a wild allegation, but for every import, Gandhis were rumoured to have received kickbacks. That was their main business! License Raj came from that mentality.
We were already a fiscally stressed economy due to the wonderful vision of Congress and their shitty economic policies which Manmohan didn’t seem to mind that much at that time.
Rajiv Gandhi pulled out of Chandrashekhar’s govt as he thought he can win the elections this time. But he was killed by the LTTE before he could fulfill his dream. Chandrashekhar’s finance minister Yashwant Sinha and commerce minister Swamy had prepared a blueprint of bailing out the economy before Rajiv Gandhi pulled out. Swamy was a vocal supporter of liberalization since 70s and found support in Sinha. Sadly, they lost majority support.
We had forex reserves of $3.1 billion in august 1990 and we were left with $975 million in july 1991. That is nearly 2/3 reduction in a year. 67% was eroded in an year! We faced balance of payments problem which means, we couldn’t pay our bills. Fiscal deficit and current account deficit was ridiculously high (10.4% and 3.1% in 1991; 3.9% and 0.1% currently). Our gold was already mortgaged for forex reserves. The skyrocket in prices of oil due to gulf crises brought India on its knees.
We already were suffering due to deterioration in exports to eastern Europe and due to USSR breakup. Remittances and tourism earnings dropped due to geo-political scenario. The rupee was also badly over-evaluated. The minimal FDI we had pulled out due to instability. The exporters were not converting their dollars to rupees as they thought that Indian govt will devalue currency and that way they will get more money. There was no inflow of money and huge external debt in economy! We had money to pay for only 3 weeks of imports and commodities.
The only way out was to get credit from IMF who had their own conditions. They wanted Indian economy to be liberal, privatized (disinvestment) and globalized. Manmohan simply agreed as he knew we are doomed without IMF and will default in three weeks. And so, we opened the economy 🙂 (with tremendous support of PV Narsimha Rao whom congress has forgotten)
The “accidental reformist” went on to become the “accidental prime minister” after 13 years. He led the most brazenly corrupt govt for 10 years and is lucky to still have followers and people who believe in him.
I sincerely hope, history does not treat you kindly unlike your wish to be treated kindly. You had all the brains but no guts to act for this country.
