Manmohan Singh’s Historic 1991 Budget: The Reforms That Saved India’s Economy
In 1991, Manmohan Singh's reforms saved India from financial crisis, modernizing the economy and industries
Manmohan Singh’s 1991 budget introduced bold economic reforms, saving India from a severe financial crisis
In 1991, India faced one of its worst financial crises. The nation had low foreign exchange reserves and struggled with rising inflation. To address this, then-Finance Minister Dr. Manmohan Singh introduced transformative economic reforms in his Union Budget under the leadership of Prime Minister PV Narasimha Rao.
Dr. Singh’s reforms focused on increasing industrial efficiency, attracting foreign investments, modernizing the financial sector, and improving public sector performance. He emphasized the need for bold changes to enhance India’s global competitiveness. In his budget speech, he described the reforms as necessary to eliminate inefficiency and bring dynamism to the economy.
However, these reforms faced stiff opposition, including from members of his own party, the Congress. The budget proposed hikes in fertilizer, petrol, and LPG prices, which angered many Congress MPs. Despite the criticism, Singh stood firm, defending the proposals as essential to revive the economy.
PM Rao allowed Singh to face the backlash independently, prompting the Finance Minister to address an unscheduled press conference to clarify the budget’s objectives. Congress leader Jairam Ramesh, in his book To the Brink and Back: India’s 1991 Story, described this period as a trial by fire for Dr. Singh.
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The reforms were debated in multiple Congress Parliamentary Party (CPP) meetings. Singh agreed to reduce the fertilizer price hike from 40% to 30% but maintained the increases in petrol and LPG prices. Ultimately, a balance was struck, ensuring small and marginal farmers’ interests were protected while retaining key aspects of the economic reforms.
Jairam Ramesh called it a win-win situation, showcasing constructive collaboration between the government and the party. Mani Shankar Aiyar supported Singh, saying the reforms aligned with late Rajiv Gandhi’s vision for India.
The 1991 budget is remembered as a turning point that modernized India’s economy and paved the way for its growth. Dr. Manmohan Singh’s resilience and leadership played a pivotal role in navigating the crisis and implementing landmark reforms.
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