In 1991, India faced a balance of payment crisis, which resulted in a heavy reliance on imports from foreign countries for our daily operations. The exchange rates were unfavorable, and our government had only enough funds to sustain the country for a mere three weeks. The overall state of our economy was so dire that our international debt exceeded 53% of our GDP. Presently, Pakistan and Sri Lanka find themselves in a worse predicament than India did in 1991.
During that time, under the leadership of PV Narasimha Rao as the Prime Minister and with the guidance of the then Finance Minister, significant changes were implemented to rescue the country from this dire situation. These changes included the introduction of new economic policies and a scramble for funds through the Old Bank International Monetary. Undoubtedly, these decisions altered the course of India's future. Today, India's GDP rivals that of developed countries like Russia, France, and the UK, and we have even emerged as a competitor to China. This remarkable progress can be attributed to the revolutionary economic policies implemented by the PV Narasimha Rao Government in 1991. These policies enabled us to achieve in just 20 years what we couldn't accomplish in the first 40 years of our independence.
If you wish to examine the data illustrating our growth prior to 1991, you will observe a significant difference. However, the crucial point here is understanding how all of this became possible. It was through the major changes made in our country's economy by PV Narasimha Rao and Manmohan Singh.
Today, I will discuss how the PV Narasimha Rao government played a crucial role in India's development by resolving the crisis in 1991. To understand why India faced such a significant crisis, we need to go back to August 24, 1608, when the East India Company entered our country with the intention of trading spices. Over time, they defeated the local kings and exploited the wealth of our kingdoms. For nearly a century, they ruled over us.
After gaining independence in 1947, our country's leaders recognized the need to promote business within India. However, they adopted a socialist system, where the government controlled the core industries, infrastructure, and power in the country. This approach limited opportunities for private companies, as they faced numerous challenges such as strict regulations and licensing requirements. Consequently, foreign investment in India dwindled, and foreign companies were reluctant to establish their businesses here.
Moreover, the government's control over crucial industries like electricity, steel, crude oil, cement, coal, natural gas, and fertilizers hindered the growth of the industrial sector. The absence of private sector participation further weakened the industry.
It was under these circumstances that the PV Narasimha Rao government took charge in 1991 and initiated significant reforms to address the crisis. These reforms aimed to liberalize the economy, encourage foreign investment, and promote private sector participation. By opening up the Indian market and reducing bureaucratic hurdles, the government created a more favorable environment for businesses to thrive.
In conclusion, the PV Narasimha Rao government played a pivotal role in steering India out of the crisis it faced in 1991. Through economic reforms and a shift towards a more liberalized economy, they paved the way for increased foreign investment and private sector growth, ultimately contributing to the development of our country.
Under this legislation, foreign companies are required to allocate sixty percent of their shares to Indian individuals if they wish to conduct business in India. Additionally, they are obligated to cease their operations in the country and depart. Consequently, prominent companies like Coca-Cola adhered to these regulations and closed their business ventures in India. The Indian economy suffered a significant blow due to the emergency imposed by Indira Gandhi, and the Gulf War in 1990, involving Iraq and America, further contributed to India's decline. In the event of defeat in the war, the global prices of crude oil skyrocketed, exacerbating the already struggling Indian economy. This situation led to a drastic devaluation of India's foreign exchange reserves, plummeting to a mere 2500 crores. This amount would only sustain the country for a mere three weeks. In response, the then Prime Minister, Chandrasekhar, sought financial assistance from the International Monetary Fund (IMF). It is important to note that Chandrasekhar Garu assumed the role of Prime Minister from a party that did not possess a majority in Parliament. Despite this, he held the position with the support of the Congress Party. However, Chandrashekhar resigned as Prime Minister in 1991 when the Congress Party withdrew its backing. In times of financial turmoil and the pursuit of funds or new debts, it is crucial to have a capable Prime Minister leading the country. In such a turbulent period, PV Narasimha Rao, hailing from united Andhra Pradesh, was sworn in as the Prime Minister of India.
The current challenge he faces is the urgent need for a financial expert to stabilize the country's economy. The individual he has identified for this role is Mr. Manmohan Singh. In 1991, PV Narasimha Rao appointed Manmohan Singh as the Finance Minister in his cabinet. The reason behind this selection was Manmohan Singh's extensive experience as an Economic Advisor to the Indian Finance Ministry, as well as his previous roles as a Secretary and Governor of the RBI. His vast knowledge in these areas made him a suitable candidate for the position. Over the course of a few years, our country's economy has undergone significant changes. Now, let us examine the steps and policies implemented by PV Narasimha Rao and Manmohan Singh. One of the initial steps taken was the devaluation of the Indian rupee by 20% against the dollar. This was done to address the main problem faced in 1991, which was the lack of funds for imports. In order to acquire the necessary funds, the government had to either borrow or generate its own money. Since the government was already burdened with debt, a plan was devised to generate funds without incurring additional debt. This involved reducing the value of the rupee, making it less valuable compared to the dollar. For instance, if initially one dollar was equal to 100 rupees, after the 20% depreciation, one dollar would be equivalent to 120 rupees. This depreciation meant that the rupee's value had decreased against the dollar.
The advantage of this is that the exports from our country to foreign countries will significantly increase. Allow me to explain how this works. When the value of our country's currency decreases, every product manufactured in our country becomes much cheaper in the international market. To illustrate this, let's consider dal as an example. Previously, one dollar could buy 100 rupees worth of dal. However, after the depreciation of the rupee, the same dollar can now buy 120 rupees worth of dal. This means that if we look at the price of pulses in dollars, everything manufactured in India will be available at a much lower price in the international market. As a result, the exports from our country will increase, and money will flow into our country from abroad. This phenomenon is known as the balance of payment in economic terminology. Do you understand? Additionally, this allows us to import goods as well.
If you are unable to comprehend this tabular concept, it is crucial to revisit it as understanding it holds great significance. However, there are certain drawbacks associated with the devaluation of currency, such as the availability of Indian products at lower prices in the global market and an increase in the cost of foreign goods in India. Additionally, inflation in India will also rise. Pay close attention to this information. It is important to note that our adversary, China, is also devaluing their currency and boosting their exports by offering cheaper goods abroad. Consequently, products manufactured in China can be found at very affordable prices in any country worldwide.
BOOK MARK PRESENT ❣️
THANK FOR SEEING THIS PAGE 📃 MEET NEXT TIME 🙂 BY FRENDS 😞
