Indian Economic Crisis 1991-92

Hello everyone, In my first blog, I would like to write about one of the key moments for the Indian Economy the 1991-92 Economic crisis that led to the liberalization of the Indian Economy.

The reason why this problem roots back to 1985 when the Indian Economy started having Balance of Payment problems and there was a major margin between the Import and Export value obviously being an import dominant country. Another reason for the swell in the Balance of Payment problem was due to high dollar bills from the Gulf countries for oil. Obviously, the deficit swelled and the Indian Government did not have enough foreign currency to even last for a week.

How was the Problem Tackled

The scale of the deficit was so high that the Indian Government the P V Narasimha Rao’s had to pledge India’s gold reserves to Britain and Swiss Banks with an option of a buy-back clause as even the IMF was strict in giving a loan of 2.2 billion dollars. Then came the liberalization part where FDI was allowed. Basic things like tariff rates were reduced, steps were taken for the promotion of exports, the then Finance Minister Manmohan Singh did away with the license raj and reduced interest rates slowly wheeling the economy back to power this is the time frame when many companies such as Coca-Cola came in and today Indian Economy is the fastest growing economy in the world.

Thank you all for reading.