Twenty-six-years ago, on 24 July 1991, the then finance minister Manmohan Singh had unveiled the historic budget that set in motion and solidified the economic reforms that had been carried out a month earlier. The era of liberalisation had been ushered in, and that of the License Raj had formally ended.
The Indian economy was in crisis. Foreign exchange reserves were so low that India could barely afford to buy three weeks worth of imports. Pushed to desperation, the government had to pledge the national gold reserves to the International Monetary Fund, in exchange for a much-needed loan. It was in this context that the historic budget of 1991 was drawn.
The budget ushered in massive fiscal adjustments, but also ensured that the poor didn’t feel the burden of these radical reforms. It also cut down on the government’s own expenditure and opened up mutual funds for the private sector, among other things.
The radical reforms gave the then Prime Minister and leader of the charge, PV Narasimha Rao, sleepless nights. Rao not only had to get the Opposition on board with his policies, but even members of his own Congress party needed convincing. He is reported to have enlisted the help of the Intelligence Bureau to find out which Congress MPs were against which specific reform, then set about to convince them.
Incidentally, Rao was well on his way to political exile after his predecessor Rajiv Gandhi denied him a party ticket in May 1991. But with Gandhi’s assassination and his grieving widow refusing to take charge of the Congress, the party looked to Rao for guidance.
With liberalisation, Rao and and his reliable Finance Minister Dr Singh did what four prime ministers before Rao tried, but could not achieve.
As he unveiled the historic document, Dr Singh said "India is now awake. We shall overcome. We shall prevail." It looks like their gamble paid off.
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