Viswanathan K's Thoughts

After the fall of Chandra Shekhar’s government, elections were called in 1991. During the campaign, Rajiv Gandhi got assassinated. That set off a sympathy wave – during the phases before Rajiv’s murder, the Congress won 50 of the 196 seats; post-that, it won 177 of 285 seats. The Congress now had enough seats (227) to try and form a coalition government. But who should head it? There was no obvious “heir” from the Family. With 100 of the 227 seats being from the south, PV Narasimha Rao (PV from here for short) had an edge, and he became the Prime Minister, writes Sanjaya Baru in 1991 .   The first order of business was, yes, that balance of payments crisis. PV’s first choice for Finance Minister was IG Patel, who had been Chandra Shekhar’s first choice too. Patel declined both PM’s offers to be the Finance Minister (FM). As PV continued his search, he found Manmohan Singh.   In his first address to the nation, in his deadpan manner, PV made a couple of statements that ...

Why and how had India’s economic condition become as precarious as it was in 1991? There were multiple reasons, explains Sanjaya Baru in 1991 . (1) Successive government policies over the previous decade had been adding to increasingly unsustainable government debt. (2) Forex reserves were falling as India continued to have few goods or services to sell abroad. (3) The USSR fell, and overnight a country with whom India traded a lot and in non-US dollars had ceased to exist. (4) Saddam invaded Kuwait, oil prices spiked and that was the straw that finally broke the Indian camel. (5) From 1989, India had a string of coalition governments. I will explain next why that last point mattered.   When we think of the 1989-91 period, we think of short-lived governments and unknown compromise candidates suddenly becoming Prime Ministers. (1) It also meant that no meaningful policy decisions could be made by such coalition governments as things began to slide downwards. (2) Global cr...

India had been lurching towards an economic crisis for a while – 1991 was just the culmination of where things had been heading, writes Sanjaya Baru in 1991 . In August, 1990, VP Singh was being urged to seek an IMF loan. An IMF loan was (and has been) more than just the dollar amount of the loan issued. “(An IMF loan) was a character certificate that would help India deal increasingly worried creditors.” But VP Singh did not ask for the loan, largely because he needed the support of the Left for his coalition to stay in power.   It was a really, really bad time for India, and not just on the economic front. The Mandal agitation, the Ram Mandir agitation, insurgencies in the North East and Punjab, and the resentment in Tamil Nadu over the aborted attempt to help the LTTE in Sri Lanka…   By December, 1990, Chandra Shekhar was the PM and things had become worse. When he asked for a loan, the IMF demurred. In that case, said Chandra Shekhar, India would have no option...

There are a lot of unsung heroes. That’s life. But it’s always good to see the odd, sincere acknowledgment of such folks. Shruti Rajagopalan does just that in case of Dr C Rangarajan, the RBI deputy director in 1991 and then the RBI director from 1992-97; along with the bureaucrats and technocrats behind the scenes.   Typically, a country on the verge of bankruptcy (like India in 1991) ends up with a “tin pot currency”. Desperate countries, in such circumstances, take IMF loans. Those loans come with conditions to restructure the economy. The country can’t or won’t restructure (internal pressures, political compulsions, ideological aversion), and so the cycle repeats itself.   India itself went through such cycles in its past. Why didn’t history repeat itself in/after 1991? Because, this time, says Rangarajan, the desire to reform the economy came from within. It was not just something, unlike the last few times, when it was being imposed from outside . As Rangarajan ...