The year 1991 higher officials of Indian government are terrified. All governments servants and ministers worried about India’s future. Those were the dark days for India. Indians are not aware of the crisis which hits India very soon. Does people from the government have become the saviors for India. If they have not dare to take bold decisions India would leave as another Sri Lanks or Pakistan. P. V. Narashimha Rao the former prime minister of India and Dr. Manmohan Singh the finance minister of India in 1991. They have written Indian next one hundred years future with golden hands.
Story of 1991 India crisis:
In 1991 government terrified because of the upcoming crisis. India always depends on the imports. Trading of imports done in dollars. We call it as foreign exchange reserve. India imports crude oil, Medicines, metals, coal, food products and many other. Our India totally runs of these products. Those times where our foreign exchange reserves are left to buy for only 3 weeks. This made the government terrified.
Economy of India is under huge debt. Fifty-four percent of the GDP is dependent on debt. Which is a very bad sign for any country. This is the exact situation of Pakistan and Sri Lanka in present. Indian left with few choices such as world banks or relay on other countries or create our own wealth.
Finance Master of India:
During these dark days our finance master of India had decided to go for the last option to create our own wealth. It was a bit difficult but a possible one. He changed all possible economic policies to make the country sustain. This made India to stand as words fifth largest GDP country.
After quite good of drama from 1990 from Janata Dal Prime Minister to 1991 mid term elections. Congress has withdrawn their support to Janata Dal and went for elections. This made PV Narashimha Rao as prime minister of India. PV has the most difficult task to save India. He elected Manmohan Singh as the finance minister of India. This choice turned the fate of India.
Manmohan Singh Credibility for Finance minister:
Manmohan Singh has served as chief economic advisor for India, secretary of Finance Minister and governor of RBI. This made him fit in this role. He knows all the finance of India from many years. So, he is the right person to perform the difficult jobs.
Changes to save India crisis:
Indian economy has fallen this made because of the emergency by Indira Gandhi. This made India 50 years back in economic conditions. The emergency affect made the inflation high to 17%. In this difficulty situations Manmohan Singh has taken few major steps to change the India’s economy.
Devaluation of Rupee for India crisis:
The major step taken by government is devaluation of Rupee. Which means valuation of Indian rupee will be decreased. Manmohan Singh made 20% decrease of India rupee in world market. For an easy example if 1$=80₹ if it decreased it by 20% means then 1$=96₹. By reading this we may think making rupee decrease leads to more crisis. But an another thought behind it.
As we have mentioned earlier India was left with 2500 crores of foreign exchange reserves. In this situation India needs to create money on their own or relay loans. The situation of India was not able to go on loans. This makes us more devasting.
Devaluation of rupees makes us more money than before. The wealth gets generated. Due to this move exports from India have increased. Let us understand why they have increased. Before this move for 1$ if we get 1kg dal, then after devaluation for 1$ we get more than 1kg. This makes our product feel cheaper and buy it in larger scale.
We all know China products are cheap and present all over the world. They export their goods only using this move. Often, they devalue their currency, which makes their products cheaper. Which increases their sales at higher percentages.
For our India, these exports have made little amount of money. This called as balance of Payments.
Side effects of devaluation:
Side affects present due to devaluation. As Indian products are cheap in market at the same time to buy foreign products, we need to pay extra 20% as we devaluated our rupee. Which makes our imports costlier.
As I have mentioned China does it very often. But sustaining this is a big finance strategy.
To know about the next step that Manmohan Singh have taken we need to know a little history of India.
Britishers have entered India in the name of business in 1700’s. But later, with their money and armed power. They have evolved into superpower in India. And they have ruled India for two hundred years.
After independence in 1947. And after the general body elections our Indian government and constitution of India was designed to follow socialistic system. Which enforces industries to be under governance of central government. If any Indian company wanted to start a business, there are many rules and regulations regarding license. These are very strict, which made few companies only establish.
Indian companies are only taking backstep to expand their business. And about the foreign companies we need to forget in those times. If any foreign company wants to come to India there are tons of restrictions. This made no company enter Indian market.
High charges on imports for any company needs. For every import of good proprietor needs to visit government offices to get clearance. This made companies difficult to survive.
The next step taken by the government then has changed these things.
LPG Reforms for India crisis:
LPG means liberalization, privatization, and globalization. This LPG reform changed such that only important industries are under government all others are sold to private, but government holds some share. This called privatization.
After the LPG reforms imports were not very restricted. Only some of the blacklisted goods are blocked by the government. Instead of those all are allowed.
All the foreign company laws and restrictions were removed which made companies to establish their business in India and invest their money in India. And any foreign company can buy shares of Indian company up to 51%. This is foreign direct investment (FDI). Indian companies were able to expand their business all over India.
I have read an article that says before these reforms all the tech company owners used to revolve around central government officers for any work. Azem Premji, Narayana Murthy used to seek permissions from government.
LPG reforms have made establishing of company an easy task. And 80% of industries establishment is license less. And the loss-making government industries and companies sold to private.
Before the reforms Tata air ways also taken by government of India in the form of socialization. And know recently they sold it to tata again.
Result of economic reforms in India crisis:
As I have mentioned before our foreign exchange reserves were 3 weeks low but just in a year it went to thirty thousand crores. Exports have doubled, imports are also at a good rate to sustain.
Bengaluru and Hyderabad cities which built due to IT industries. These cities can establish in such a high manner because of these reforms. Foreign companies and Indian companies were shifted to Bengaluru and Hyderabad because of the resources they have.
Their expansion provided some lakhs of job throughout India.
GDP growth:
Before PV government our GDP was 1.1% but only after 1 year it raised to 4.4%. Before inflation was 17% which reduced to 8%. All these changes we have seen are only because of Manmohan Singh.
Not only GDP growth some hundreds of companies established. Which made some thousands of people direct jobs and some other lakhs of people indirect occupation. Such as tiffin center, hostels, restaurants, and others.
These reforms made India 5th biggest economy in the world. PV and Manmohan Singh are such great people even though the opposition does not have any problem with them.
All may thank Manmohan Singh but the man behind him is PV who supported him for bold decisions as PM.
Lets know about another Tata company of our India is Godrej.
Know about Inflation which is coming in future to India.
Lets know about Atul case study and lets make men rights equal to women.
