1991: How P. V. Narasimha Rao Made History

by Sanjaya Baru

A series of political and economic events of the 1980s came to a head around 1990-91. India was on the verge of defaulting on its external payments obligations, with foreign exchange reserves dwindling rapidly as oil prices went up, exports went down and non-resident Indians began withdrawing their deposits in foreign currency accounts in India. While this situation can, in part, be attributed to unexpected and extraneous factors like the Gulf War of 1990-91, one important reason for the precipitous fall in foreign exchange reserves was a loss of confidence in the Indian government’s ability to deal with a difficult economic situation. That difficulty was almost entirely on account of the political brinkmanship and populism of a variety of political actors. In the end, it was politics that trumped economics. The economic crisis of 1991 was as much a consequence of bad economic management of the preceding half decade during the tenures of Rajiv Gandhi (1984-1989) and V. P. Singh, as it was of the political choices they made. That is, the responsibility for the events that combined to push India

1991 crisis