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

Rajni Kothari argued that Nehru’s greatest contribution to nation-building was ‘not to have started a revolution but to have given rise to a consensus’. He called it ‘the Congress system’. The Congress, he said, was a ‘party of consensus’—an umbrella party containing within itself a wide range of interests and opinions from across the Indian subcontinent.

Charan Singh, who had quit the Congress as a critic of Nehru

Her brutal assassination in her own home by her own bodyguards resulted in a tsunami wave of sympathy that delivered 404 seats to the Congress under Rajiv Gandhi.

October 1988, V. P. Singh, a senior minister, quit Rajiv Gandhi’s government, accusing him of corruption in defence procurement deals, and formed the Janata Dal, merging elements from the Janata Party that was in power in 1977-79, some former Congress members and the Lok Dal party. Rajiv was wounded by the corruption charges.

was widely believed that one of the beneficiaries, an Italian businessman, Ottavio Quattrocchi, was a friend of Sonia Gandhi’s.

V. P. Singh’s government was riven by rivalries from day one. Singh first proposed the name of Haryana leader Devi Lal to ensure that party veteran Chandra Shekhar would not become prime minister, and then stepped in when Devi Lal withdrew his candidature in favour of Singh. Devi Lal was made deputy prime minster as part of the deal. A livid Chandra Shekhar conspired to oust Singh from the outset. He was helped in this effort by parties that had initially supported the Janata Dal but began having second thoughts. Thus the BJP withdrew support due to differences on the issue of building a temple to Lord Rama at Ayodhya in Uttar Pradesh.

In a hard-hitting column published in January 1990 in the left-wing magazine Mainstream, and written by someone identified mysteriously as a ‘Congressman’, Rajiv Gandhi’s ‘style of functioning’ was severely criticized and the decline in the Congress’s political standing was attributed to the growing distance between the party’s political base and its increasingly elitist leadership.

The country’s balance of payments, already under stress thanks to rising oil prices and falling exports, came under further pressure when international credit rating agencies placed India under watch,

PV did. He steered the country through a period of political uncertainty, economic crisis and shift in the global balance of power.

Saddam Hussein? Saddam had been friendly towards India, the only Arab leader to support India against Pakistan on the Kashmir issue.

But then Chandra reminded the prime minister that Saddam had now become a terrible dictator, ready to destroy any opposition. He had become unpopular among the Arabs and was engaged in a territorial dispute with Iran. Moreover, India needed US support in securing assistance from the IMF. It was time for India to rethink its approach.

India was a non-aligned nation during the Cold War, it had reached out to the US for military assistance when attacked by China in 1962, and to the Soviet Union in 1971, in preparation for the liberation of Bangladesh (when the US and China had ganged up on Pakistan’s side). It was now India’s turn to respond to a US request for help.

Back in 1981 the US had threatened to do just that when Indira Gandhi’s government approached the IMF for a US$5 billion extended fund facility. At that time, the US wanted more forthright criticism of the Soviet invasion of Afghanistan than what Indira Gandhi had been willing

the Times of India ‘spilled some hazardous beans’, as Inder Kumar Gujral, V.

was Gujral who had originally authorized the overflight of US military aircraft over Indian territory.

fall of the Berlin Wall in 1989.

after the Cold War, United States has emerged as the only superpower.

After cold war us became only superpower

Dr Indraprasad Gordhanbhai Patel, IG to those who knew him well, was an economist with a stellar reputation and years of experience in both the central government and international financial institutions. While IG was regarded by his peers as a thorough professional, the fact that he was from Gujarat and had worked directly under Morarji Desai, a fellow Gujarati, during Desai’s long innings as finance minister in Nehru’s and Indira’s governments, may have made Indira Gandhi regard him as ‘Morarji’s man’,

In November 1990, after the fall of the V. P. Singh government, President Venkataraman had asked Rajiv if he would like to stake his claim, as leader of the single largest group in Parliament, to form the government. Rajiv had declined, assuring the president that the Congress would ensure political stability by supporting the Chandra Shekhar government at least for a year. The government of the day had several crises to deal with—the Mandal agitation for expanding the scope of reservations, the Mandir agitation aimed at building a temple for Lord Rama in Ayodhya, the insurgency in the Northeastern region and in Punjab, the unrest in Kashmir, the unease in Tamil Nadu following the aborted Indian attempt to help Sri Lanka eliminate the Tamil Tigers and, above all, the balance of payments crisis, with the lingering fear of an external default.

Rjeevji refusel to form government in 1990 when india faced crisis

Venkataraman’s only concern was that a political crisis at that time, days before the Parliament was to meet to vote on the union budget, would have grave consequences for the economy. He wanted the budget passed by Parliament. By mid-February 1991 Rajiv Gandhi realized that allowing the government’s budget to be voted on in Parliament would not just help secure an IMF loan for India, but would in fact help extend the life of the Chandra Shekhar government. As we have noted, parliamentary approval of the budget is akin to a vote of confidence. It allows a minority ruling party to remain in government till it is displaced through a vote of no-confidence in a subsequent session of Parliament. This would mean Chandra Shekhar would remain prime minister at least until the convening of the monsoon session in July. To prevent this, Rajiv first forced a delay in budget presentation. Rather than allow the budget to be presented to Parliament on the last day of February, as is the norm, Rajiv demanded and secured a postponement to 7 March.

1961 was an eventful year. The Russian cosmonaut Yuri Gagarin became the first human in space. It was the year the Berlin Wall came up. And John F. Kennedy became President of the United States.

Earlier that day, Congress MPs had disrupted Parliament accusing the Chandra Shekhar government of ‘snooping’ on Rajiv Gandhi.

angry Chandra Shekhar shot back, ‘Go back and tell him that Chandra Shekhar does not change his mind three times a day.’

Venkataraman notes in his autobiography that he felt ‘sorry’ to see Chandra Shekhar go.

The rising external debt burden and falling foreign exchange reserves was a major worry.

fiscal,

sovereign

Indira and Rajiv Gandhi were prime ministers for twenty-two of the twenty-seven years covered by Joshi and Little.

Political populism, on the other hand, contributed to increased government spending on subsidies. The share of fiscal deficit, that is the deficit in the government budget and the government’s interest payment obligations in national income, shot up from an average of 6.3 per cent in the Sixth Plan period of 1980-85 to 8.2 per cent in the Seventh Plan period of 1985-90. Most economists regard this to be too high and prefer the number to be below 3 per cent. To make matters worse, the internal debt of the government also went up from 36 per cent of GDP at the end of 1980-81 to 54 per cent of GDP at the end of 1990-91.

GDP going up from an annual average of 2.6 per cent in 1980-85 to 3.9 per cent in 1985-90.

Even with an overwhelming majority in Parliament, with over 400 MPs on the treasury benches in a house of 514 members, Rajiv Gandhi was unable to steer the economy away from fiscal mismanagement and crisis. Summing up ...

cynicism.

high competence. Manmohan Singh was appointed adviser to the prime minister. He had just returned to India after a stint with the South Commission in Geneva before which he had been the central bank governor and deputy chairman of the Planning Commission.

As we have seen, by mid-February 1991, Rajiv Gandhi, nervous at the progress made by the Chandra Shekhar government, forced a delay in the budget presentation. And, even before this important budgetary business could be concluded, the partnership between Chandra Shekhar and Rajiv Gandhi came apart. On 6 March, Chandra Shekhar submitted his resignation.

draconian

‘I do not want to go down in history as the man who sold gold for buying oil,’ said a furious Chandra Shekhar.

mortgaged

defaulted.’

For most Indians gold has sentimental value. A family that mortgages its gold to finance its daily ...

Lal Bahadur Shastri has entered the history books, despite his brief tenure, it is because of the way he handled the 1965 war with Pakistan;

Jawaharlal Nehru was prime minister of free India from August 1947 till his death in May 1964. His daughter Indira Gandhi served two tenures as prime minister—from January 1966 to March 1977 and from January 1980 to October 1984, when she was assassinated. On her death her son Rajiv Gandhi, an airline pilot-turned-party functionary, was immediately sworn in as prime minister and was elected in his own right, riding a political sympathy wave generated by his mother’s assassination, in December 1984. He served a full term till December 1989, when his party was defeated in the elections.

Three generations of the Nehru-Gandhi family had ruled India for thirty-seven of the first forty-two years after Independence. Coalition and minority governments have been the rule since 1991,

In April 1986, Mukherjee was expelled from the Congress, only to be rehabilitated in 1988.

till 1977—the prime minister only occasionally became party president. More often than not the two posts were held by different individuals. But, after 1978, Indira Gandhi held both posts and Rajiv continued that system.

Yashwantrao Balwantrao Chavan. The chief minister of Maharashtra in 1960-62, Chavan was always viewed as a potential prime minister. He began his career in national politics as defence minister in Jawaharlal Nehru’s cabinet immediately after the 1962 debacle. Chinese troops had crushed their ill-equipped and unprepared Indian counterparts along the disputed border between the two Asian giants in the high Himalayas. Chavan restored military morale and ensured adequate investments were finally made in defence. Of prime ministerial calibre, Chavan was widely viewed as one of the most capable members of Indira Gandhi’s cabinet. But he never made it to the top job.

Bhagwat Jha Azad—a former chief minister of Bihar and father of cricket player Kirti Azad.

‘Not taking a decision is also a decision’.

For a man who knew a dozen languages (he could fluently read, write and speak over half a dozen) and was known to have had a series of romantic entanglements, he was surprisingly uncommunicative in person.

PV was contemplating becoming a priest at the Courtallam Peetham. He had also planned to associate himself with the activities of the Bharatiya Vidya Bhavan’s Rajaji Institute and the Swami Ramananda Tirtha Rural Institute.