How would it be to lock yourself up in a room and throw the key to some unknown place? To have total isolation from the rest of the world? Well, this was India’s economic condition just after the independence.After fighting a long battle against the “Angrez”, India got its independence in 1947. Indians were now free, but was Indian economy free as well?
Indian economy got its freedom after 43 years of independence in the year 1991, which are known as economic reforms . By 1985 , India had fell low in foreign exchange reserves due to which all essential imports were not possible .By the end of 1990, it was a serious economic crisis. RBI also refused new credit and foreign exchange reserve had been reduced to such a point that India could barely finance three weeks. Indian government gave national gold as collateral to IMF in exchange for a loan.
Government of India’s immediate response was to secure an emergency loan of 2.2 billion from IMF in exchange of 67 tonnes of gold . This decision resulted in collapse of Chandra Shekhar government and brought India a new Prime Minister P.V Narshima Rao. Mr. Rao declared Manmohan Singh as his Minister for Finance. Narshima Rao brought many reforms in Indian economy because of IMF with lot of terms and conditions in relation to loans. This eventually paved the way for LPG – Liberalisation, Privatisation and Globalisation.
Liberalisation: Before 1991, no other foreign investors were allowed to invest in India . This was done to protect upcoming small Indian entrepreneurs. But after 1991, foreign investors were allowed to invest in India’s market.
Privatisation: Before 1991, government used to invest in every business and around 5-10 sectors were under private ownership. After privatisation, government started doing disinvestment in Public sector companies and started promoting private sector.
Before 1991, India was not allowing other countries to enter in the country, so reach of indian entrepreneurs was also limited in foreign market. After 1991 reforms, it changed the whole indian market by making it global market by bilateral product sale and give Indian entrepreneurs a new platform to show there potential.
Finally, after the approval of these three milestones, India’s relation with other countries in terms of trade initiated to a great extent. Today, many companies are competing against each other to grab a slot for investment in India. So, after these reforms, we’ve turned it around for ourselves and we’ve done it in the best way possible.
Post by – Raghav Sharma