Dispatches from India

Part one of this series (“India before 1991: tiger caged”) examined the highly statist economic strategy implemented by Nehru, India’s first prime minister. Envisioned  as a means of protecting the country from neo-colonial exploitation by industrialists  and foreigners, Nehru’s policies had the effect of limiting the opportunities available  to India’s poor while sheltering a handful of crony capitalists from both domestic  and foreign competition. Indira Gandhi’s decision to double down on those policies  in the 1960s and 70s further stifled competition, deterred entrepreneurship, and  incentivized corruption, while deepening India’s isolation from the global economy. 

The relatively minor changes Indira and Rajiv Gandhi managed to implement during the 1980s, such as loosening controls on capacity expansion and cutting  taxes, are best described as “pro-business” rather than “pro-market”. They helped  improve the profitability of incumbent industrial producers and commercial  establishments, but failed to dismantle barriers to competition and trade –  postponing the kind of transformational liberalization that would benefit all Indians,³ and making the economy increasingly dependent on unsustainable fiscal deficits  underwritten by costly foreign financing.  

By the end of the 1980s, India was lurching toward the edge of a financial  precipice.⁴ At the same time, the nation’s politics began to descend into escalating  turmoil, and the window of opportunity that Rajiv Gandhi had been granted to  liberalize policy seemed “unlikely to be repeated.” Nevertheless, the conclusion of  The Economist’s May 1991 “tiger caged” report – which predicted that “[t]he tiger  will not be freed for some yet” – was about to proven dramatically wrong.⁵ 

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With Rajiv Gandhi bogged down in scandals and confidence in the economy  badly damaged, the Congress party performed poorly in the 1989 election. Mr.  Gandhi’s former finance and defense minister, V. P. Singh, managed to piece  together a weak coalition government (led by his short-lived Janata Dal party) “that  was united only in its opposition to [Congress]”.⁶ 

In the summer of 1990, V. P. Singh traveled to Kuala Lumpur for an international  summit and was stunned by the rapid progress Malaysia had made since his  previous visit to that country just five years earlier.⁷ He asked his top advisor – the  Oxford-educated economist Montek Ahluwalia – to examine what India needed to  do in order to replicate the robust growth rates in Southeast Asia and China. The  resulting internal study, which would later form the blueprint for India’s post-1991  reforms, provided the most detailed and comprehensive outline to date of the  policy changes India needed to undertake.⁸ In July 1990, this report – dubbed the  “M document” – was leaked to the press, sparking huge controversy.⁹ 

Even as V. P. Singh attempted to manage the political fallout from the “M  document”, the August 1990 Iraqi invasion of Kuwait suddenly exacerbated  India’s already worrisome trade and financial imbalances.¹⁰ Conflict in the Gulf  caused the price of crude oil and petroleum products – which accounted for over  a quarter of India’s import bill¹¹ – to double,¹² and contributed to economic  slowdowns in both the United States and the Soviet Union – the first- and  second-largest destinations for Indian exports, respectively.¹³  

In what remains the largest air evacuation in history (and a source of great national pride), the Indian government airlifted home over 170,000 Indian citizens who had  been working in Kuwait at the time of the invasion.¹⁴ However, the combination of  the subsequent sharp decline in remittances from overseas Indians, costlier oil,  and a slump in exports was disastrous for India’s current account.¹⁵ Between the  first six months of 1990 and the second half of the year, the nation’s current  account deficit jumped from $2 billion to over $5 billion.¹⁶  

A current account deficit is principally a trade deficit, which implies a net flow of  capital out of a country. A financial account surplus is the capital that must flow  into a country to offset that trade deficit.  

For a detailed primer on balance of payments terminology, please refer to the  appendix on page 20 of part one of this series (“India before 1991: tiger caged”).

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Within weeks of the invasion of Kuwait, V. P. Singh authorized his officials to reach  out to the International Monetary Fund (IMF) – making his the first Indian  administration in a decade to request a loan from the Fund. Despite India’s increasingly precarious financial position, V. P. Singh knew that borrowing from  the IMF remained politically contentious. As soon as it became public knowledge  that a government was applying for assistance, its leaders “would be attacked in  parliament and in the press for subjugating the country’s interests to foreign  domination.” To reduce his political vulnerability, V.P Singh limited his request to  $1.8 billion – equivalent to one-quarter of India’s IMF quota, the maximum it could  draw without promising specific policy reforms¹⁸ – even as it became increasingly  obvious that more would be needed to bridge the nation’s financing gap.  

The government tried to buy itself more time with various traditional crisis-fighting  measures, including a tightening of import licensing and surcharges on bank  finance for imports.¹⁹ However, a series of sectarian disputes brought down V. P.  Singh’s administration in November 1990, when a breakaway faction of his party  defected before a no-confidence vote. That splinter group installed its leader,  Chandra Shekhar, as prime minister – though its survival was entirely dependent  on the backing of the Rajiv Gandhi-led Congress party.²⁰ Immediately after Shekhar took office, his new government sent two top officials to Washington “on  a secret mission” to seek a larger funding package from the IMF, and began  preparing an emergency budget proposal.²¹

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In January 1991, the start of the Gulf War destabilized Shekhar’s already-weak  administration. As U.S.-led coalition forces began a massive aerial bombing  campaign in Iraq, his government struggled to preserve a neutral stance amid  heated domestic opposition to the refueling of U.S. warplanes at Mumbai’s  international airport.²² The public outcry forced Shekhar to delay the presentation  of his emergency budget to parliament – “effectively [putting] discussions with the  IMF on hold.”²³ In March 1991, right as the plan was finally on track to be submitted 

to parliament, the Congress party pulled its support for the government²⁴ – toppling  Shekhar’s nascent administration (a “four-month comic interlude”) and triggering  yet another election.²⁵  

Increasingly wary foreign lenders saw India’s trade and financial imbalances  deteriorating, its borrowers (including the government) facing rating downgrades,  and its politics in disarray. As the country’s political turmoil deepened, the Reserve  Bank of India (RBI) alerted the Ministry of Finance that Indian banks were losing  their ability to access dollar funding from global lenders.¹⁰ The RBI expended its  foreign currency reserves in an attempt to defend the value of the rupee (which  was pegged to a basket of the dollar, yen, pound sterling, and deutsche mark).²⁶  

By the time the Shekhar government fell, those reserves had dwindled to $2.2  billion – barely enough to cover a month’s worth of imports.²⁷ Locked out of  commercial funding and with no prospect of support from the teetering Soviet  Union, India was on the brink of default – kept afloat only by a limited credit line  from the IMF. It was increasingly clear that the nation was not going to get further  aid without significant conditions attached. 

The first thing Indians noticed about the official election manifesto released by the  Congress party on April 16, 1991 was that it contained no mention of the word  “socialism”. Deviating from Congress’s decades-old economic dogma, the  platform promised to deepen the economic liberalization that the party’s leader,  Rajiv Gandhi, had partially implemented during the previous decade.  

Opposition politicians accused Congress of “trying to take the country to the pre 1947 mentality”. Critics heaped scorn on Mr. Gandhi for being “in a hurry […] to  reverse his grandfather’s [Jawaharlal Nehru’s] belief in self-reliance”, declaring  that he had “outdone the former British Prime Minister, Mrs. Margaret Thatcher […]  in his bid at economic liberalisation”.²⁸ Barely a month later, on May 21, 1991 –  one day after the first round of India’s staggered, multi-phase election – Rajiv  Gandhi was assassinated.  

As confidence crumbled, authorities postponed the election and resorted to a  desperate stopgap measure, raising $234 million from the Union Bank of  Switzerland (UBS) by sending 20 tons of gold on a Swissair flight to Zurich.²⁹ For  a nation with a deep-rooted reverence for gold as a traditional symbol of  prosperity,³⁰ this humiliating news – much more so than S&P’s subsequent  downgrade of India’s sovereign credit rating to junk³¹ – “finally drove home the  point that something drastic had to be done to save the Indian economy,”³² which  “was so wrecked that India was pawning its family jewelry.”³³ 

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Rajiv Gandhi’s assassination in the middle of India’s 1991 election suddenly left  Congress without a leader. After Sonia Gandhi, Rajiv’s Italian-born widow, declined  to take the reins, the party was forced to turn to P. V. Narasimha Rao (prime minister  1991-96). A fixture of national politics for decades, the 70-year-old Rao had held  ministerial positions in the administrations of both Indira and Rajiv Gandhi.  

Sporting a plain dhoti (a traditional men’s garment worn wrapped around the waist)  and “the pout of an ageing uncle”,³⁵ Rao had a “highly underwhelming appearance”  and the “charisma of a dead fish”.³⁶ With a secretive, taciturn personality that  contrasted sharply with the charm and exuberance of his young predecessor,³⁷ Rao  was widely seen as a frail, indecisive, and unambitious “fuddy-duddy”.³⁸ 

When polling resumed in mid-June, sympathy for the Gandhis ensured that Congress won the largest number of seats in parliament – though not an absolute majority.³⁹ Chosen “because he was seventy, quiet, dull, and […] threatened no one”, the party’s newly-installed leader, Narasimha Rao, proceeded to form a coalition government that nobody expected would last for very long.⁴⁰ Luckily for India, Rao’s underwhelming exterior concealed a shrewd, ideologically flexible pragmatist who was about to defy all expectations.

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Late on June 20, 1991 – the eve of his swearing-in as India’s tenth prime minister  – Rao was briefed on India’s balance of payments crisis, the previous  government’s secret discussions with the IMF, the pressure to devalue the rupee,  and the mortgaging of the central bank’s gold bullion. “I didn’t know it was this  bad…” was his reaction⁴² upon being informed that the RBI’s reserves had been  depleted to just $1.1 billion – enough to cover only two weeks’ worth of imports.²⁷  A protectionist “who confessed that he did not understand economics”, Rao  became an economic liberalizer that evening.⁴³  

A novelist and technology enthusiast who wrote fiction in multiple languages and  taught himself computer code, Rao cut his teeth as a wartime propagandist  during India’s 1962 conflict with China.⁴¹ While serving as foreign minister in the  1980s, he observed how Deng Xiaoping – whom he would later call his  “philosophical mentor”³⁶ – was able to portray a wholesale reorientation of  China’s economy as a mere extension of Mao’s vision.⁴⁴  

By the time Rao reached India’s highest political office, he had learned how to  harness a fast-moving narrative, sideline his adversaries, and push through  unpopular policies – skills that were about to prove extraordinarily useful as he  steered the world’s largest democracy out of a desperate crisis and into a new  economic era.⁴⁵ 

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Over the following 33 days, India overhauled its entire industrial, trade, and fiscal  policy, kick-starting a transformation that would irreversibly alter the very nature of  the country’s economy.⁴⁶ On June 21, Rao made the first of several pivotal  decisions – appointing as his finance minister Dr. Manmohan Singh, an  economist and former governor of the RBI who happened to be familiar with the  managing director of the IMF.⁴⁷ Decades earlier, while studying at Cambridge and  Oxford, Singh had written about the flaws of India’s import substitution policies.⁴⁸  Now, he and the rest of Rao’s cabinet would be given free rein to implement tough  reforms to the controls that had for so long stifled India’s development.⁴⁹  

To avoid the perception that his government was acting under foreign pressure,  Rao instructed his officials “to do whatever had to be done immediately” and  preemptively, rather than wait for the IMF to lay out conditions. On the evening of  June 21, the prime minister told his chief of staff “not to wait for formal orders and  instead, [to] start working closely” with the newly-installed Singh.⁵⁰ 

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In the decade leading up to 1991, much of India’s political class continued to view  economic liberalization – in particular, the softening of import controls – as the cause of  India’s problems, and saw re-regulation as the cure for the country’s current account  deficit.⁵² Few recognized or acknowledged that the combination of protectionism and  the License Raj had created a vicious circle of misguided policy – with scarcity triggering  calls for more controls, which further inhibited production, resulting in even more  scarcity, corruption, and hostility to the prospect of liberalizing reform.  

Throughout the 1980s, however, a small but vocal faction within India’s economic  establishment had endorsed and outlined most of the liberalizing policies that would later  come to comprise the post-1991 reforms. As a result, pro-liberalization technocrats  “were already in place with papers and draft policy documents” when circumstances  presented them with a historic opportunity to push through momentous changes.⁵³  Singh was one of several of these economic dissidents – many of them educated at or  employed by U.S. universities and institutions such as MIT and the World Bank – whom  Rao was able to draft into key roles overseeing and implementing the reforms.⁵⁴  

On June 22, Rao used his first nationally-televised address to notify Indians that  his government intended to do more than simply resolve the immediate crisis. In  contrast to his predecessors – who had responded to India’s balance of payment  crises of 1966 and 1981 with tentative, half-hearted tweaks to its statist economic  system – Rao began to exploit India’s brief dependence on the IMF “to direct policy  attention towards the competitiveness of the Indian economy.”⁸ Declaring that  “there [were] no soft options left,” Rao announced that his administration was  committed to “removing the cobwebs” obstructing India’s path towards  industrialization and international competiveness.²⁴ On July 9, he stated in another speech that the “bulk of government regulations and controls on our economic  activity have outlived their utility.”⁵⁵  

Without losing any time, Rao’s officials began proactively implementing the  reforms they anticipated would be demanded by the IMF, starting with a long overdue exchange rate adjustment. In the first four days of July 1991, Singh  devalued the rupee by 25% against the U.S. dollar.⁵⁶ Midway through the  process, Rao reportedly lost his nerve and attempted to halt the devaluation. By  the time he contacted his cabinet, however, the deed was done, and Singh had  already announced it to the public. It was too late to turn back.⁵⁷  

“When 1991 happened, suddenly it felt like somebody opened the jail door, came  in, and removed all the shackles, and said, ‘You’re free. You can go.’”⁵⁸ Suresh Krishna, industrialist

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“We do not have time to postpone adjustment and stabilisation. We must act fast  and act boldly […] I do not minimise the difficulties that lie ahead on the long and  arduous journey on which we have embarked. But as Victor Hugo once said, ‘no  power on earth can stop an idea whose time has come.’ I suggest that the  emergence of India as a major economic power in the world happens to be one such  idea. Let the whole world hear it loud and clear. India is now wide awake.”⁴ 

Manmohan Singh’s speech to Parliament on July 24, 1991 

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The whirlwind of reforms that followed came to be known as the New Economic  Policy (NEP).⁵⁹ At noon on July 24, 1991, the government announced plans to  dismantle the License Raj, open most sectors to private-sector competition, and  

scrap the MRTP Act (the 1969 law that had prevented business expansion).⁶⁰  

Four hours later, Manmohan Singh presented to India’s Parliament a budget that  eliminated most price controls, did away with quantitative restrictions on production  and imports, slashed import duties, liberalized interest rates, initiated a  “disinvestment” policy for partially privatizing state-owned companies, instituted an  automatic approval process for foreign ownership of up to 51% of direct  investments in most industries (replacing the 40% ceiling that had been imposed  back in 1973), and handed responsibility for capital markets regulation to a new,  independent agency. Declaring that “[t]he room for maneuver, to live on borrowed  money or time, does not exist anymore”, Singh added that this would all be  achieved concurrently with a significant reduction in the government’s fiscal  deficit.⁴  

Manmohan Singh’s pivotal 1991 and 1992 budget speeches are particularly  memorable examples of an annual tradition known as “Budget Day”. Each February,  India’s finance minister is expected to observe a series of quirky rituals – including  serving a giant pan of halwa (a sugary dessert) to his officials and posing for  photographs clutching a briefcase on the steps of parliament – before reading a  speech (typically laden with literary references) that outlines the government’s  economic plans. In the weeks preceding Budget Day, business news channels do  their best to build anticipation with sensationalist special programming in which  talking heads breathlessly speculate about the budget’s potential impacts on  taxpayers, investors, and companies.⁶¹ 

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The NEP initially faced tremendous resistance from a “divided parliament, nervous  industrialists, shrill intellectuals, and a stodgy, statist Congress party”.³⁶ Despite  the slow-motion collapse of the U.S.S.R. and the by-then clear success of China’s  market-oriented policies, most of India’s politicians seemed “unaware of how much  of an anomaly” their country had become.⁵ Opposition leaders denounced the  “bitter pills” of currency devaluation, deregulation, and other previously 

unthinkable reforms⁶² as a surrender to the “dictates” of international financial institutions.⁶³ Senior officials from Rao’s own party accused his government of  compromising India’s sovereignty and betraying Nehru’s legacy, and “beseeched  Sonia [Gandhi] to take over Congress and rescue the country.”⁶⁴ 

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Rao successfully neutralized these simplistic and predictable attacks – which had  deterred previous administrations from even proposing contentious policy changes  – with a slick combination of political browbeating and public relations. He jolted  his opponents within Congress into submission by threatening to replace the  party’s system of patronage with competitive primaries.⁶⁴ Meanwhile, he and  Singh nimbly recast the reform program from “a matter of compulsion” imposed by  Western institutions to “a matter of conviction” borne out of Indians’ own  confidence in the value and necessity of tough changes.⁵⁰ 

While acknowledging that the reforms had an external catalyst (i.e., the IMF), Rao and Singh were careful to present the NEP as an Indian-made package – built on  the foundations laid by Nehru and the Gandhis, consisting largely of policies that  the Congress party had publicly endorsed in its 1991 election manifesto, and  implemented on India’s own initiative (albeit with the understanding that it was a  necessary precondition for assistance).⁶⁶  

Taking advantage of his reputation as an elder statesman unassociated with the  Congress party’s “pro-business” wing, Rao deliberately avoided championing free market policies as an end unto themselves, instead deftly characterizing  liberalization as being “of value to the nation”.⁵⁰ Citing the need to “attain an  adequate technological and competitive edge in a fast changing global economy”,⁴ Rao and Singh portrayed the NEP and subsequent reforms as a course correction  en route to Nehru’s vision of economic independence,⁶⁷ with access to foreign  

capital, technology, and export markets substituted for “self-reliance”.⁶⁸   

“Berlin Walls are collapsing all around us, and at such a time to stick to  ideas and ideologies of the 1960s does not show us to be radical, but  reactionary.”⁶⁹ 

Industrialist J.R.D. Tata writing in The Times of India, August 1, 1991 

Rao and Singh sustained a near-daily pace of policy announcements, speeches, and press conferences in a calculated attempt to keep the opposition “off balance.”⁷⁰ Rao employed agents from the Intelligence Bureau (India’s equivalent of the FBI) to spy on Sonia Gandhi and other senior Congress party members, and used the resulting scuttlebutt regarding their views on economic reforms to prioritize certain policies while quietly shelving other controversial proposals (e.g., full privatizations of government-owned firms) that risked provoking too much of a backlash from powerful constituencies.³⁶ Meanwhile, Singh slipped into the first package of reforms a provision – the removal of duties on newsprint – designed to keep India’s rowdy media “on side”.⁷¹

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In the end, the root cause and severity of the circumstances in which India found  itself in 1991 limited Rao’s opponents’ options for derailing the reform process.  With airlifts of the central bank’s gold still on the front pages, even critics of the  government’s specific reform plans were forced to acknowledge that the country’s  own past policy choices had left India with a binary choice between taking some  form of corrective action and an alternative – an unprecedented default on its  sovereign debt – that “would be a recipe for long-term disaster.”⁴⁷ 

In the absence of exogenous shocks such as droughts, wars, or  spikes in the price of oil, India could arguably have muddled through  each its pre-1991 crises. Whereas misguided policy had  exacerbated those emergencies, 1991 saw a “policy-induced crisis  par excellence”, in which the country had sunk into an unsustainable  debt trap long before external developments cut short politicians’  room for maneuver.⁷² 

Although the Iraqi invasion of Kuwait and slowdowns in export  markets hastened the day of reckoning, it is clear that policies  pursued throughout the 1980s – in particular, increasingly reckless  public spending – were untenable “and would have resulted in a crisis  at some point, perhaps a little later in the 1990s.”⁷³ 

The “euphoric” response to the NEP from news outlets and the public convinced  Rao that “the people were […] ahead of the politicians in wanting reform.”⁴⁰ The government proceeded to implement a sweeping set of transformative policies –  from a restructuring of the telecommunications industry to an overhaul of capital  markets regulation – that went far beyond the boilerplate terms laid out by the  IMF and the World Bank (which joined the structural adjustment program in  December 1991),⁸ and continued even after the formal expiration (in late 1993) of  India’s arrangements with both institutions.⁷⁴ 

In February 1992, Manmohan Singh used his next budget presentation – the first  in India’s history to be televised live – to unveil another round of dramatic changes.  These included abolishing the Controller of Capital Issues (the Delhi-based  bureaucracy that arbitrarily set the valuations at which companies could go public),  establishing a roadmap for making the rupee fully convertible, permitting the entry of new private-sector banks, reducing the share of banks’ deposits that had to be invested in government bonds, and directing the recently-formed Securities and  Exchange Board of India (SEBI) to institute a set of rigorous regulations aimed at protecting investors and improving transparency.⁷⁵

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Proclaiming that “[w]e must not remain permanent captives of a fear of the  East India Company, as if nothing has changed in the past 300 years”, Singh  announced that foreign institutions would be permitted to invest in Indian equities.  Asserting that Indian industry was capable of going head-to-head against foreign  competitors “on its own terms”, he threw open India’s doors to multinational  companies.⁷⁶ Foreign investment surged from a meager $80 million in 1991 to  $6.4 billion just three years later.⁷⁷ By mid-1993, the country was attracting enough  private capital that it “had no further need to borrow” from the IMF or World Bank.⁷⁸  

In November 1992, the government backed the creation of a new equity exchange  – the National Stock Exchange (NSE) – to compete with the Bombay Stock  Exchange (BSE), a storied institution that had been reduced by decades of  financial repression to an inefficient, high-cost monopoly.⁷⁹ Within a year of  commencing operations in late 1994, turnover on the NSE’s state-of-the-art,  transparent platform surpassed that of the BSE. Along with a third government 

promoted institution (the National Securities Depository, established in 1996 as the  country’s first electronic securities clearing house), the SEBI and the NSE  facilitated the formation of dynamic, reliable capital markets capable of supporting  the growth of Indian companies in the years ahead.⁸⁰ 

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In March 1993, the RBI shifted from pegging the rupee to a basket of currencies  to the current managed float exchange rate system. By August 1994, the  government made the rupee fully convertible for current account transactions –  removing all remaining restrictions on importers’ ability to convert rupees into  foreign currencies, giving businesses free rein to pay for imports or fund  expansions outside India, and enabling foreign investors to repatriate their capital  on demand.⁷⁹ 

A key common factor across every modern balance of  payments crisis, from India (1991) to Mexico (1994) to the East  Asian economies (1996), was a fixed exchange rate system  that pegged each country’s currency to the dollar (or a basket  of reserve currencies) – thereby preventing exchange rate  adjustments that might have corrected the mismatch between  each country’s current account deficit and its financial account  surplus before it provoked a crisis.⁸² 

Under the managed float system it has employed since 1993, the Reserve Bank of India (RBI) continues to intervene in the  foreign exchange market, but allows the rupee to fluctuate in  response to market forces. Crucially, the RBI permits the  currency to depreciate to help contain current account deficits;  its intervention in the foreign exchange market has to date 

focused on curbing excessive rupee appreciation.  

For more detail on the relationship between a country’s  balance of payments and its exchange rate system, as well as  the process by which central banks such as the RBI intervene  in forex markets, please refer to the appendix on page 20 of  part one of this series (“India before 1991: tiger caged”). 

India’s recovery from the crisis took less than two years – the fastest turnaround  in the history of IMF structural adjustment programs.⁸³ As the efficacy of the  NEP and subsequent reforms became increasingly apparent, they gained the  backing of an overwhelming majority in parliament – winning approval not only  from Rao’s own party, but also from the BJP (the largest opposition party), which  noisily qualified its support by declaring that the reforms were BJP ideas that  Congress “had appropriated”.³⁹ Bolstered by the economy’s unexpectedly rapid  resurgence, Rao became the first Indian prime minister outside of the Nehru 

Gandhi dynasty to complete a full five-year term.⁸⁴ 

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The reforms galvanized by the 1991 crisis “unleashed an explosion of pent-up  commercial energy”,⁸⁵ transforming India’s economy from an inward-looking  laggard dominated by public-sector firms into a major beneficiary of globalization  led by private enterprises, exports, and foreign investment. Though less dramatic  than the collapse of communism in Europe, India’s liberalization instantly reshaped 

the lives of nearly 900 million people – more than double the population of the  entire Soviet bloc.⁸⁶  

The removal of red tape that had acted as a barrier to new entrants resulted in a flood of new competitors “across virtually all industries” following liberalization.⁸⁷ More new businesses were registered from 1992 through 1995 than during the entire preceding decade.⁸⁸ Over that same four-year period, the number of publicly-traded Indian companies more than doubled (to over 5,000),⁸⁹ driven in part by the availability of foreign capital – which allowed upstarts to raise the funds  necessary to compete with the country’s established, cash-rich conglomerates in  capital-intensive sectors such as cellular telecoms.⁸ Cumulatively over the first  three years following the crisis (from 1992 through 1994), India attracted more  foreign direct investment than it had over the preceding three decades.⁹⁰  

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The sheltered monopolies and cartels that had dominated India’s economy up until  1991 feared that they would lose out from reforms – particularly the Rao  government’s moves to slash tariffs, abolish the import licensing regime, and allow  multinationals back into the country.⁹¹ In 1993, a group of tycoons who came to  be known as the “Bombay Club” wrote a letter to Manmohan Singh complaining,  among other things, about the rapid reduction in import duties and the difficulty of  competing with multinational corporations’ production efficiencies and “marketing  shenanigans”.⁹² The Bombay Club’s unofficial spokesman, the head of Pune 

based Bajaj Auto,⁹³ warned that Indian industry was at risk of being “wiped out”.⁶³  

Dispelling such fears, Indian businesses have thrived since 1991. Forced to  compete with the world’s best, home-grown companies discovered that they could – not only in India, but in markets worldwide. Before liberalization, India  manufactured fewer than 2 million motorbikes annually. Now it produces ten times  that number, including over 2 million for export.⁹⁴ The domestic market, which had been dominated by Japanese imports, was rapidly taken over by none other than  Bajaj Auto.⁸ 

India’s auto industry comprises not only producers of cars and trucks, but  also manufacturers of “two-wheelers” (motorbikes, scooters, and mopeds)  and “three-wheelers” (auto rickshaws). There are over five times as many  motorized two-wheelers on the country’s roads as there are cars.⁹⁵

Many Indian businesses have become multinationals themselves. In a post colonial role reversal, the Tata Group is now the biggest private-sector employer  in the United Kingdom.⁹⁶ Pune-based Bharat Forge has grown into the world’s top  supplier of metal forgings.⁹⁷ Indian-owned ArcelorMittal is the globe’s leading steel  producer.⁸⁵ Mumbai-based Sun Pharma is among the largest manufacturers of  generic drugs. Delhi-based Bharti Airtel is the dominant wireless carrier across  much of sub-Saharan Africa.⁹⁸  

Before liberalization, an over-valued rupee and counter-productive import substitution policies held back the competitiveness of Indian exports. The 1991  currency adjustment and subsequent lowering of protectionist barriers allowed  firms to make the most of India’s plentiful comparative advantages – from its  abundance of technically adept, English-speaking talent to its position as the  lowest-cost producer of most cotton textiles.⁹⁹ During the 1990s, India’s export  volumes rose at almost double the highest rate achieved in any prior decade.⁷³  Over the past quarter-century, India’s exports have grown by a factor of twenty – fully reversing the decline in the country’s share of world exports between  independence (1947) and 1991.¹⁰⁰  

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The connection between trade and investment liberalization and the post-1991 acceleration in India’s economic growth is clear.¹⁰² The availability of new inputs and higher-quality, lower-cost substitutes for domestically-produced intermediate goods gave rise to entirely new products and industries. One-quarter of the increase in India’s exports during the 1990s was driven by products that had not been produced prior to the reforms.¹⁰³ Access to foreign-made capital goods, along with “spillover effects” from foreign technology firms rushing to take advantage of India’s skilled workforce, spurred the country’s emergence as a global hub for software development, business process outsourcing, and pharmaceuticals manufacturing. These new industries created tens of millions of well-paying jobs, not only at Indian companies such as Infosys and Wipro, but also with multinationals such as IBM – which now employs more workers in India  than in the United States.¹⁰⁴

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Leveraging their experience dealing with inadequate infrastructure, erratic  bureaucrats, and a demanding but thrifty home market, Indian firms have become  the world’s leading “frugal innovators” – using scrappy design to put “first-world”  products within reach of billions of lower-income consumers. Mumbai-based  Godrej Group combined high-end insulation and a computer fan to create the “Little  Cool”: a ₹3,250 ($50) refrigerator that runs on a 12-volt battery.¹⁰⁵ General  Electric’s Indian subsidiary invented a ₹25,000 ($386) portable electrocardiograph  (ECG) device that is now exported to emerging markets around the globe.¹⁰⁶ 

Led by a reinvigorated private sector, booming exports, and surging foreign  investment, India’s economy has expanded nine-fold in the quarter-century since  Manmohan Singh quoted Victor Hugo before parliament.¹⁰⁷ The country’s share  of world stock market capitalization has more than quintupled, to 2.4%,¹⁰⁸ while the  government’s fiscal deficit (as a percentage of GDP) has been halved.¹⁰⁹ Private 

sector investment has doubled as a share of GDP, to 24%.¹¹⁰ The number of motor  vehicle-owning households has increased more than eleven-fold.¹¹¹ Since 1992,  when the end of state-owned Air India’s monopoly gave rise to the country’s first  private airlines, India’s air passenger traffic has ballooned by a factor of twelve.¹¹²  In 1991, Indians faced a three-year waiting list to get a landline connection. Today,  the country has over one billion mobile phone subscribers.¹¹³ 

Since 1991, India’s per capita income has grown more than three times faster than  in the decades that preceded liberalization. Refuting the notion of a so-called  “Hindu rate of growth”, increases in the country’s per capita income have  surpassed global per capita GDP growth by a large and expanding margin,  outpacing the rest of the world during booms as well as in the midst of global  downturns.¹¹⁴ Belying critics who claimed that reforms would only benefit the rich,  the proportion of India’s population living in poverty has been cut in half.¹¹⁵  

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India’s decision to open up to foreign trade, capital, and technology has  strengthened its financial resilience and stability. The country’s exports of  information technology and other services have climbed from virtually nothing in  1991 to over $160 billion (as of 2016),¹¹⁶ helping to offset its merchandise trade  deficit. The dramatic decline in oil prices since 2014 – coupled with the  government’s canny decision to take advantage of the price drop to eliminate  costly fuel subsidies – allowed India to narrow its current account deficit to just  0.5% of GDP last year.¹⁶ 

More importantly, India now attracts enough “sticky”, un-borrowed sources of capital to reliably fund much wider current account deficits, if necessary – allowing  the country to calmly surmount oil price surges akin to the one that heralded its  1991 balance of payments crunch.¹¹⁷ Cumulatively over the past two decades, the  amount of foreign direct investment that has flowed into India has covered its trade deficit more than twice over.¹¹⁸ 

Furthermore, by intervening in the currency market during periods in which the net  inflow of capital into India (i.e., the country’s financial account surplus) has  exceeded the amount necessary to fund its current account deficit,¹¹⁹ the RBI has  been able to amass forex reserves of over $400 billion – enough to cover India’s 

annual trade deficit more than eight times over.²⁷ 

The 1991 crisis triggered reforms that – despite the Rao government’s carefully worded homages to India’s erstwhile leaders – effectively repudiated Nehru’s  vision of India as an autarkic, state-dominated oasis of self-reliance. Yet those  same reforms have brought India closer than ever to Nehru’s goal of “economic  independence”. Formerly a supplicant to international development agencies,  India is now a net donor of foreign aid.¹²⁰ Once dependent on food assistance,  India is now the world’s largest rice exporter.¹²¹ India repaid its last IMF loans in  2000, and has been a creditor of the Fund since 2003.¹²² In 2005, a quarter of a  millennium after the first parts of India came under the dominion of the East India  Company, its trademarks and other assets were acquired – by an Indian  entrepreneur.¹²³ In 2009, the RBI triumphantly purchased 200 tons of gold from  the IMF – triple the quantity it had been forced to pawn during the 1991 crisis.¹²⁴  

In a 1995 lecture at Columbia University, Manmohan Singh declared that India’s  “tryst with globalization had become irreversible”.⁸ He has been proven right, as  every successive government since the crisis has kept India on the path of  reform, varying only “in terms of speed and emphasis.”¹²⁵ Nevertheless, India’s 

liberalization is a “half-finished revolution”: the country’s dynamic economy now  churns out world-class companies and engineers, but its average citizen is more  likely to be connected to a mobile broadband network than to a sewer.¹²⁶ A future  series of dispatches will delve deeper into the ways in which the economic reform 

unleashed in 1991 remains a work in progress, and will examine the tools available  to policymakers seeking to realize the half-fulfilled promise of 1991. 

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* * *  

Andrei Stetsenko 

October 31, 2017

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References and Notes 

¹ Aiyar, Swaminathan. “25 years of economic reforms: From super-beggar to potential superpower”  (July 2016). The Economic Times. Retrieved from http://blogs.economictimes.indiatimes.com/  Swaminomics/25-years-of-economic-reforms-from-super-beggar-to-potential-superpower/ ² The Economist (October 2010). Issue 397:8702, cover page. Retrieved from  

https://www.nypl.org/collections/articles-databases/economist-historical-archive-1843-2008 ³ In the decade leading up to 1991, many Indians took notice of the early success of economic  reforms in Deng Xiaoping’s China and “the inability of the Soviet system to meet even its food  requirements”. Nevertheless, India’s democratic system meant that it was politically tougher for its  leaders during the 1980s, Indira Gandhi and her son Rajiv, to dismantle the Nehruvian economic  system than it had been for China’s Deng Xiaoping to undo the legacy of Mao. Rodrik, Dani and  Subramanian, Arvind. “From ‘Hindu Growth’ To Productivity Surge: The Mystery of the Indian  Growth Transition” (March 2004). National Bureau of Economic Research, Working Paper 10376.  Retrieved from http://www.nber.org/papers/w10376.pdf; Mukherji, Rahul. “The State, Economic  Growth, and Development in India” (February 2009). India Review, 8:1, pages 81-106. Retrieved  from http://dx.doi.org/10.1080/14736480802665238 

⁴ Singh, Manmohan. “Budget 1991-92 Speech” (July 1991). Government of India, Ministry of  Finance. Retrieved from http://indiabudget.nic.in/bspeech/bs199192.pdf 

⁵ Crook, Clive. “A Survey of India: Small world” (May 1991). The Economist, 319:7705, pages 139- 142. Retrieved from https://www.nypl.org/collections/articles-databases/economist-historical archive-1843-2008 

⁶ Boughton, James M. Tearing Down Walls: The International Monetary Fund, 1990-1999 (February  2012), Chapter 9: Five Fat Years: Recovery from the Debt Crisis, 1990-94. International Monetary  Fund. Retrieved from https://www.imf.org/external/pubs/ft/history/2012/pdf/c9.pdf 

⁷ Vikraman, Shaji. “The years of V P Singh, and the start-stop push to reforms” (April 2017). Indian  Express. Retrieved from http://indianexpress.com/article/explained/the-years-of-v-p-singh-and-the start-stop-push-to-reforms/ 

⁸ Mukherji, Rahul. “The State, Economic Growth, and Development in India” (February 2009). India  Review, 8:1, pages 81-106. Retrieved from http://dx.doi.org/10.1080/14736480802665238 ⁹ Bazliel, Sharla. “The inheritance of a loss” (February 2014). India Today. Retrieved from  http://indiatoday.intoday.in/story/john-elliott-describes-congress-descent-into-chaos/1/343524.html ¹⁰ Raghavan, Srinivasa. “1991: The Real Villain Was Rajiv Gandhi, The Real Hero Was Not  Manmohan” (July 2016). Swarajya. Retrieved from https://swarajyamag.com/politics/1991-the-real villain-was-rajiv-gandhi-the-real-hero-was-not-manmohan 

¹¹ Prakash, B. A. The Indian Economy Since 1991 (2009), Chapter V: External Sector. Pearson  Education India. Retrieved from https://books.google.com/books?id=gDjiQIU9QvUC ¹² Bloomberg L.P. Bloomberg Crude Oil Historical Price. Retrieved from Bloomberg terminal,  OILPHIST Index 

¹³ Cerra, Valerie and Saxena, Sweta C. “What Caused the 1991 Currency Crisis in India?” (October 2000). International Monetary Fund, Working Paper 00/157. Retrieved from  

http://www.imf.org/en/Publications/WP/Issues/2016/12/30/What-Caused-the-1991-Currency-Crisis in-India-3794 

¹⁴ Pareek, Shreya. “Did You Know That The Largest Air Evacuation In History Was Done By India?”  (February 2015). The Better India. Retrieved from http://www.thebetterindia.com/15179/heres need-know-largest-air-evacuation-history-india/ 

¹⁵ International Monetary Fund. IMF India BOP Current Account Exports Goods (2016). Retrieved  from Bloomberg terminal, 5341R007 Index; International Monetary Fund. IMF India BOP Current  Account Imports Goods (2016). Retrieved from Bloomberg terminal, 5341R008 Index 

 ¹⁶ International Monetary Fund. BOP6 India Current Account Total Net USD (2016). Retrieved from  Bloomberg terminal, BCA6B534 Index 

¹⁷ Nair, Vijay. Published in Chari, Mridula, “In photos: The Air India staff behind Ashkay Kumar’s  ‘Airlift’” (January 2016). Scroll.in. Retrieved from https://scroll.in/article/802539/in-photos-the-air india-staff-behind-akshay-kumars-airlift 

¹⁸ IMF member countries contribute funds through a quota system. The Fund’s policies allow a  member to draw 25% of its quota without specifying forward-looking policy commitments. Boughton,  James M. Tearing Down Walls: The International Monetary Fund, 1990-1999 (February 2012),  Chapter 9: Five Fat Years: Recovery from the Debt Crisis, 1990-94. International Monetary Fund.  Retrieved from https://www.imf.org/external/pubs/ft/history/2012/pdf/c9.pdf 

¹⁹ Acharya, Shankar. “India: Crisis, Reforms and Growth in the Nineties” (July 2002). Stanford  University, Center for International Development, Working Paper 139. Retrieved from  http://globalpoverty.stanford.edu/sites/default/files/publications/139wp.pdf 

²⁰ Hazarika, Sanjoy. “Rival of Singh Becomes India Premier” (November 1990). The New York  Times. Retrieved from http://www.nytimes.com/1990/11/10/world/rival-of-singh-becomes-india premier.html 

²¹ Baru, Sanjaya. “It was 25 years ago today…” (July 2017). The Economic Times. Retrieved from  http://blogs.economictimes.indiatimes.com/et-commentary/it-was-25-years-ago-today/ ²² Crossette, Barbara. “India in an Uproar Over Refueling of U.S. Aircraft” (January 1991). The New  York Times. Retrieved from http://www.nytimes.com/1991/01/30/world/india-in-an-uproar-over refueling-of-us-aircraft.html 

²³ Boughton, James M. Tearing Down Walls: The International Monetary Fund, 1990-1999 (February 2012), Chapter 9: Five Fat Years: Recovery from the Debt Crisis, 1990-94. International  Monetary Fund. Retrieved from https://www.imf.org/external/pubs/ft/history/2012/pdf/c9.pdf ²⁴ Aiyar, Shankkar. “Memories of 1991: The final months before the Indian economy was finally  unshackled” (July 2016). Quartz. Retrieved from https://qz.com/721742/memories-of-1991-the final-months-before-the-indian-economy-was-finally-unshackled/ 

²⁵ Crook, Clive. “A Survey of India: Expedite” (May 1991). The Economist, 319:7705, page 154.  Retrieved from https://www.nypl.org/collections/articles-databases/economist-historical-archive 1843-2008 

²⁶ Chowdhury, Jayanta R. “Lessons from a tale of two rupee devaluations” (June 2013). The  Telegraph. Retrieved from http://www.telegraphindia.com/1130624/jsp/business/story_17040688.jsp ²⁷ International Monetary Fund. India Reserve Foreign Exchange Holdings (August 2017).  Retrieved from Bloomberg terminal, 534.055 Index 

²⁸ The Times of India News Service. “BJP, CPM lambast Cong. manifesto” (April 1991). The Times  of India. Retrieved from https://www.nypl.org/collections/articles-databases/times-india-1838-2003 ²⁹ The New York Times. “20 Tons of Gold Sold by India” (June 1991). Retrieved from  http://www.nytimes.com/1991/06/07/business/20-tons-of-gold-sold-by-india.html 

³⁰ The Economist. “Why do Indians love gold?” (November 2013). Retrieved from  

https://www.economist.com/blogs/economist-explains/2013/11/economist-explains-11 ³¹ Bloomberg L.P. Republic of India – Standard & Poor’s Sovereign Credit Rating (LT Debt).

Retrieved from Bloomberg terminal, 1504Z IN [Equity] CRPR 

³² Guru, Sutanu. “25 Years Of Reforms: What Really Happened in July 1991” (January 2016).  Business World. Retrieved from http://businessworld.in/article/25-Years-Of-Reforms-What-Really Happened-In-July-1991/14-01-2016-90232/ 

³³ Lulla, Anil B. “How a forgotten ex-PM paved the way for entrepreneurship in India” (January 2017). YourStory. Retrieved from https://yourstory.com/2017/01/p-v-narasimha-rao-half-lion startup-lesson-25-years-ago/

³⁴ Aiyar, Shankkar. “Wholesale Politics, Retail Reforms Define Post 1991 India” (July 2016).  Retrieved from https://www.linkedin.com/pulse/wholesale-politics-retail-reforms-define-post-1991- india-aiyar 

³⁵ Doctor, Vikram. “25 Years Of Reforms: PV Narasimha Rao, the man of that moment” (July 2016).  The Economic Times. Retrieved from http://economictimes.indiatimes.com/news/politics-and nation/25-years-of-reforms-pv-narasimha-rao-the-man-of-that-moment/articleshow/53308599.cms ³⁶ Biswas, Soutik. “Reassessing India's 'forgotten prime minister'” (July 2016). BBC News.  Retrieved from http://www.bbc.com/news/world-asia-india-36791913 

³⁷ Ray, Sanjana. “Remembering PV Narasimha Rao, ‘modern-India’s Chanakya’, on his 96th  birthday” (June 2017). YourStory. Retrieved from https://yourstory.com/2017/06/narsimha-rao legacy/ 

³⁸ Rao had been planning on retiring; in fact, his belongings had been in the process of being packed  up so that he could depart New Delhi immediately following the election. Weinraub, Bernard. “MAN  IN THE News; Congress Party's Calculating Loyalist: Pamulaparti Venkata Narasimha Rao” (June  1991). The New York Times. Retrieved from http://www.nytimes.com/1991/06/22/world/man congress-party-s-calculating-loyalist-pamulaparti-venkata-narasimha-rao.html; Malhotra, Inder.  “Rear View: How Narasimha Rao became PM” (April 2015). Indian Express. Retrieved from  http://indianexpress.com/article/opinion/columns/rear-view-how-narasimha-rao-became-pm/ ³⁹ Krishna, Ananth V. India Since Independence: Making Sense of Indian Politics (August 2010).  Pearson Education India. Retrieved from https://books.google.com/books?id=8v7Vr2iQUHkC ⁴⁰ Das, Gurcharan. India Unbound (April 2002), Chapter 15: The Golden Summer of 1991. Anchor  Books. 

⁴¹ Datta-Ray, Sunanda K. “PV Narasimha Rao: The Saga of the Southerner” (October 2016).  OPEN Magazine. Retrieved from http://www.openthemagazine.com/article/essay/pv-narasimha-rao the-saga-of-the-southerner 

⁴² Puljal, Abhilash. “Book Review: Half Lion: How P.V. Narasimha Rao transformed India by Vinay  Sitapati” (August 2016). London School of Economics, South Asia @ LSE blog. Retrieved from  http://blogs.lse.ac.uk/southasia/2016/08/03/book-review-half-lion-how-p-v-narasimha-rao transformed-india-by-vinay-sitapati/ 

⁴³ Harikrishnan, Charmy. “25 years of reforms: How a PM with zero knowledge of economics  scripted India’s biggest turnaround story” (July 2016). The Economic Times. Retrieved from  http://economictimes.indiatimes.com/news/politics-and-nation/25-years-of-reforms-how-a-pm-with zero-knowledge-of-economics-scripted-indias-biggest-turnaround-story/articleshow/53309051.cms ⁴⁴ Sitapati, Vinay. Half Lion: How P.V. Narasimha Transformed India (June 2016). Penguin Books.  Excerpt retrieved from https://www.foundingfuel.com/article/the-man-who-knew-tomorrow/ ⁴⁵ Baru, Sanjaya. 1991: How P.V. Narasimha Rao Made History (September 2016). Aleph Book  Company. Excerpt retrieved from http://www.huffingtonpost.in/sanjaya-baru/pv-narasimha-rao-not manmohan-singh-paved-the-way-for-indias_a_21576432/ 

⁴⁶ Masoodi, Ashwaq. “Forget more big bang reforms, fix small things: Jairam Ramesh” (April 2016).  Livemint. Retrieved from http://www.livemint.com/Politics/ZcrGcIo2xQvBOGJCuTkd6O/Forget more-big-bang-reforms-fix-small-things-Jairam-Rames.html 

⁴⁷ Aiyar, Shankkar. Accidental India: A History of the Nation's Passage Through Crisis and Change (October 2012). Aleph Book Company. Excerpt retrieved from http://www.firstpost.com/living/how rao-made-manmohan-indias-accidental-reformer-468707.html 

⁴⁸ Williamson, John. “The Rise of the Indian Economy” (May 2006). University of North Carolina at  Chapel Hill, American Diplomacy. Retrieved from  

http://www.unc.edu/depts/diplomat/item/2006/0406/will/williamson_india.html 

⁴⁹ Kalra, Mahesh A. “25 Years of India’s Economic Reforms: A Story of Triumphs and Losses”  (October 2016). DNA India. Retrieved from http://www.dnaindia.com/money/report-25-years-of india-s-economic-reforms-a-story-of-triumphs-and-losses-2264106

⁵⁰ Bamzai, Kaveree. “Inside the complex mind of India’s forgotten PM” (August 2015). India Today.  Retrieved from http://indiatoday.intoday.in/story/inside-the-complex-mind-of-indias-forgotten pm/1/461472.html 

⁵¹ Express archive photo. Indian Express. Retrieved from http://indianexpress.com/photos/picture gallery-others/manmohan-singh-turns-83-today-here-are-some-rare-pictures-from-express-archives 3050525/3/ 

⁵² Crook, Clive. “A Survey of India: Plain tales of the license raj” (May 1991). The Economist,  319:7705, pages 145-149. Retrieved from https://www.nypl.org/collections/articles 

databases/economist-historical-archive-1843-2008 

⁵³ Asthana, Vandana. Water Policy Processes in India: Discourses of Power and Resistance (September 2009), Chapter 3: The process of economic liberalization and private sector  participation. Routledge. Retrieved from https://books.google.com/books?id=q0CMAgAAQBAJ ⁵⁴ Other key figures behind the design and implementation of the NEP included Montek Ahluwalia,  Jairam Ramesh, Shankar Acharya, and Rakesh Mohan. Ye, Min. Diasporas and Foreign Direct  Investment in China and India (August 2014), Chapter 4: Deregulation without Openness in India.  Cambridge University Press. Retrieved from https://books.google.com/books?id=qUxsBQAAQBAJ ⁵⁵ Rao, Narasimha. “The Prime Minister’s 9 July 1991 Speech” (July 1991). India Before ‘91.  Retrieved from http://indiabefore91.in/node/6/submission/16 

⁵⁶ Bloomberg L.P. USDINR Spot Exchange Rate – Price of 1 USD in INR, Historical Data.  Retrieved from Bloomberg terminal, INR Curncy 

⁵⁷ That month, while it awaited more help from the IMF, Rao’s administration was forced to pledge  another 47 tons of gold as collateral for $405 million worth of additional loans from the Bank of  England and Bank of Japan. Vikraman, Shaji. “25 years on, Manmohan Singh has a regret: In  crisis, we act. When it’s over, back to status quo” (July 2016). The Indian Express. Retrieved from  http://indianexpress.com/article/india/india-news-india/manmohan-singh-opening-indian-economy 1991-economic-reforms-pv-narasimha-rao-rbi-indian-rupee-devaluation-2886876; Vikraman, Shaji.  “In fact: Glitter of 1993 gold scheme lay in its amnesty clause” (April 2017). The Indian Express.  Retrieved from http://indianexpress.com/article/explained/in-fact-glitter-of-1993-gold-scheme-lay-in its-amnesty-clause 

⁵⁸ Khanna, Tarun. Interview with Suresh Krishna (December 2012). Harvard Business School,  Baker Library Special Collections, Creating Emerging Markets Oral History Collection. Retrieved  from http://www.hbs.edu/creating-emerging-markets/interviews/Pages/profile.aspx?profile=skrishna ⁵⁹ Dasgupta, Biplab. Globalization: India’s Adjustment Experience (July 2005), Chapter 1:  Introduction. SAGE Publications. Retrieved from  

https://books.google.com/books?id=mpdMLKJtEAAC 

⁶⁰ Kapila, Uma. India’s Economic Development Since 1947 (2008), Chapter 11: Macroeconomic  Stabilisation: Trade, Fiscal and Monetary Policy Issues. Academic Foundation. Retrieved from  https://books.google.com/books?id=KTbA2R_6gjAC 

⁶¹ Subramanian, Samanth. “Long View: The Origin of the Budget Briefcase” (March 2012). The  New York Times. Retrieved from https://india.blogs.nytimes.com/2012/03/14/long-view-the-origin-of the-budget-briefcase; Chaudhary, Archana. “India’s Budget Is Seeking the Sweet Spot: QuickTake  Q&A” (January 2017). Bloomberg News. Retrieved from https://www.bloomberg.com/news/articles/  2017-01-25/india-budget-seeks-sweet-spot-as-cash-grab-sours-quicktake-q-a  

⁶² Miranda, Luis. “25 years of liberalisation and what life was like in 1991” (February 2016). Forbes  India. Retrieved from http://www.forbesindia.com/blog/accidental-investor/25-years-of-liberalisation and-what-life-was-in-1991 

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http://www.tandfonline.com/doi/full/10.1080/10357820701373309

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http://indiatoday.intoday.in/gallery/union-budget-rail-budget-petroleum-budget-sports-budget education-budget/9/14288.html 

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⁶⁸ The Times of India News Service. “Licensing scrapped” (July 1991). The Times of India.  Retrieved from https://www.nypl.org/collections/articles-databases/times-india-1838-2003 ⁶⁹ Tata, J.R.D. “Berlin Walls should fall” (August 1991). The Times of India. Retrieved from  https://www.nypl.org/collections/articles-databases/times-india-1838-2003 

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⁷² Joshi, Vijay and Little, I.M.D. India: Macroeconomics and Political Economy, 1964-1991 (July  1994), Chapter 8: Crisis and Short-Term Macroeconomic Policy: An Appraisal. The World Bank,  World Bank comparative macroeconomic studies. Retrieved from http://documents.worldbank.org/  curated/en/259451468772490617/India-Macroeconomics-and-political-economy-1964-1991 ⁷³ Krueger, Anne O. Economic Policy Reforms and the Indian Economy (July 2002), Chapter 1: The  Indian Economy in Global Context. University of Chicago Press. Retrieved from  

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0586CC45A28A2749852567F5005D8C89 

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http://indianexpress.com/article/explained/express-economic-history-series-the-steady-progress-of fiis-and-a-continuing-debate/ 

⁷⁶ Singh, Manmohan. “Budget 1992-93 Speech” (February 1992). Government of India, Ministry of  Finance. Retrieved from http://indiabudget.nic.in/bspeech/bs199293.pdf 

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⁷⁸ Boughton, James M. Tearing Down Walls: The International Monetary Fund, 1990-1999 (February 2012), Chapter 9: Five Fat Years: Recovery from the Debt Crisis, 1990-94. International  Monetary Fund. Retrieved from https://www.imf.org/external/pubs/ft/history/2012/pdf/c9.pdf ⁷⁹ Sharma, Shalendra D. China and India in the Age of Globalization (July 2009), Chapter 2: China  and India Embrace Globalization. Cambridge University Press. Retrieved from  

https://books.google.com/books?id=3c8hAwAAQBAJ 

⁸⁰ Vikraman, Shaji. “NSE and NSDL: Institutions that revolutionised Indian bourses” (July 2016).  The Indian Express. Retrieved from http://indianexpress.com/article/explained/manmohan-singh indian-economy-indian-rupee-devaluation-nse-nsdl-stock-exchange-bombay-stock-exchange 2924639/ 

⁸¹ Jnpet. “National Stock Exchange, Mumbai, India” (December 2007). Wikimedia Commons.  Retrieved from https://commons.wikimedia.org/wiki/File:National_Stock_exchange_Mumbai.JPG

⁸² IMF papers single out the Mundell-Fleming model as the most instructive framework for  understanding India’s crisis. Mundell-Fleming theorizes that in countries with low capital mobility,  fiscal expansions lead to higher interest rates, higher output, and current account deficits that  exceed financial account inflows. The resulting balance of payments deficit must be corrected by an  exchange rate adjustment large enough to reduce the current account deficit, which (after the  government finally allowed the rupee to depreciate in July 1991) is what ended up occurring in India.  Cerra, Valerie and Saxena, Sweta C. “What Caused the 1991 Currency Crisis in India?” (October  2000). International Monetary Fund, Working Paper 00/157. Retrieved from  

http://www.imf.org/en/Publications/WP/Issues/2016/12/30/What-Caused-the-1991-Currency-Crisis in-India-3794 

⁸³ Pandhi, Nikhil. “‘Manmohan Singh Came To Reforms Out Of Conviction, Narasimha Rao Came  To It Out Of Compulsion’: An Interview With Jairam Ramesh” (September 2015). The Caravan  Magazine. Retrieved from http://www.caravanmagazine.in/vantage/manmohan-singh-reforms conviction-narasimha-rao-compulsion-jairam-ramesh 

⁸⁴ Datta-Ray, Sunanda K. “Meanwhile: The unsung genius of India’s reforms” (December 2004).  The New York Times. Retrieved from http://www.nytimes.com/2004/12/29/opinion/meanwhile-the unsung-genius-of-indias-reforms.html 

⁸⁵ The Economist. “Business in India: A bumpier but freer road” (September 2010). Retrieved from  http://www.economist.com/node/17145035 

⁸⁶ United Nations, Department of Economic and Social Affairs, Population Division. World  Population Prospects (2015), File POP/1-1: Annual total population (both sexes combined) by major  area, region and country, 1950-2015. Retrieved from https://esa.un.org/unpd/wpp 

⁸⁷ Mody, Ashoka, Nath, Anusha, and Walton, Michael. “Sources of Corporate Profits in India:  Business Dynamism or Advantages of Entrenchment?” (July 2010). India Policy Forum, 7. National  Council of Applied Economic Research (New Delhi), Brookings Institution. Retrieved from  http://www.ncaer.org/publication_details.php?pID=108 

⁸⁸ Government of India, Ministry of Statistics & Programme Implementation. “Statistical Year Book  India 2016” (December 2015), Chapter 17: Companies. Retrieved from  

http://www.mospi.gov.in/sites/default/files/Statistical_year_book_india_chapters/ch17.pdf ⁸⁹ World Bank. World Development Indicators (2016), World Federation of Exchanges, Listed  domestic companies, total. Retrieved from http://data.worldbank.org/indicator/CM.MKT.LDOM.NO ⁹⁰ World Bank. World Development Indicators (2016), Foreign direct investment, net inflows (BoP,  current US$). Retrieved from https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD;  Organization for Economic Co-operation and Development. “Foreign Direct Investment in India”  (1996). Retrieved from http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=  OCDE/GD(96)169&docLanguage=En 

⁹¹ Chauvin, Sophie and Lemoine, Françoise. “India in the World Economy: Traditional  Specialisations and Technology Niches” (September 2003). Centre d'Etudes Prospectives et  d'Informations Internationales, Working Paper No. 2003-09. Retrieved from  

https://ideas.repec.org/p/cii/cepidt/2003-09.html 

⁹² Bhandari, Bhupesh. “Once there was the Bombay Club…” (January 2013). Business Standard.  Retrieved from http://www.business-standard.com/article/opinion/bhupesh-bhandari-once-there-was the-bombay-club-111070800048_1.html 

⁹³ Singh, Pragya. “The Home Alone Boys” (January 2011). Outlook Magazine. Retrieved from  https://www.outlookindia.com/magazine/story/the-home-alone-boys/269748 

⁹⁴ Society of Indian Automobile Manufacturers. “India SIAM Two Wheeler Sales Domestic &  Exports” (2017). Retrieved from Bloomberg terminal, INVS2WHL Index 

⁹⁵ Goel, Rahul, Mohan, Dinesh. Guttikunda, Sarath, and Tiwari, Geetam. “Assessment of motor  vehicle use characteristics in three Indian cities” (June 2015). Transportation Research Part D: Transport and Environment, 44, pages 254-265. Retrieved from http://www.urbanemissions.info/wp content/uploads/docs/2015-06-TRD-India-Three-Cities-Veh-Characteristics.pdf 

⁹⁶ Elliott, John. “Ratan Tata, the UK’s largest private sector employer, steps down” (December  2012). The Independent. Retrieved from http://www.independent.co.uk/voices/our-voices/the foreign-desk/ratan-tata-the-uks-largest-private-sector-employer-steps-down-8433061.html ⁹⁷ Bobo, Jeff. “Hawkins plant purchased by world's largest metal forging company” (January 2017).  The Kingsport Times-News. Retrieved from http://www.timesnews.net/Business/2017/01/26/  Hawkins-plant-purchased-by-world-s-largest-metal-forging-company 

⁹⁸ Onu, Emele and Alake, Tope. “Bharti Airtel Bets on Nigeria Broadband to Chase Down MTN”  (May 2017). Bloomberg News. Retrieved from https://www.bloomberg.com/news/articles/2017-05- 25/bharti-airtel-bets-on-nigeria-broadband-to-narrow-gap-with-mtn 

⁹⁹ The Economist. “Business in India: Now for the hard part” (June 2006). Retrieved from  http://www.economist.com/node/6969740 

¹⁰⁰ Norbom, Jon. “International Trade Statistics: 1900-1960” (May 1962). United Nations Statistical  Office. Retrieved from https://unstats.un.org/unsd/trade/imts/Historical%20data%201900-1960.pdf;  World Bank. World Development Indicators (2016), Exports of goods and services (current US$).  Retrieved from https://data.worldbank.org/indicator/NE.EXP.GNFS.CD 

¹⁰¹ Kannaiyan, Jay. “Colombia, Part 2: Medellin” (May 2010). Jammin Global Adventures.  Retrieved from http://jamminglobal.com/2010/06/colombia-part-2b-medellin.html 

¹⁰² Panagariya, Arvind. “India’s Trade Reform” (March 2004). India Policy Forum, 1. National  Council of Applied Economic Research (New Delhi), Brookings Institution. Retrieved from  https://www.brookings.edu/wp-content/uploads/2016/07/2004_panagariya.pdf 

¹⁰³ Goldberg, Pinelopi, Khandelwal, Amit, and Pavcnik, Nina. “Imported inputs and domestic product  growth in India” (December 2008). Centre for Economic Policy Research, VoxEU. Retrieved from  http://voxeu.org/article/imported-inputs-and-domestic-product-growth-india 

¹⁰⁴ Byrne, John A. “IBM now employs more workers in India than US” (October 2013). New York  Post. Retrieved from http://nypost.com/2013/10/05/ibm-now-employs-more-workers-in-india-than-us/ ¹⁰⁵ Munuswamy, Suresh. “ChotuKool: the $69 fridge for rural India” (December 2009). New Atlas.  Retrieved from https://newatlas.com/refridgerator-rural-india-chotukool/13680 

¹⁰⁶ Abraham, Neenu. “GE Healthcare to make India hub for low-cost devices; products will be up to  40% cheaper” (November 2013). The Economic Times. Retrieved from  

https://economictimes.indiatimes.com/industry/healthcare/biotech/healthcare/ge-healthcare-to-make india-hub-for-low-cost-devices-products-will-be-up-to-40-cheaper/articleshow/25282416.cms ¹⁰⁷ International Monetary Fund. IMF India GDP Current Prices (1980-2022). Retrieved from  Bloomberg terminal, IGN$IND Index; World Bank. World Bank India GDP in Current USD (1960- 2016). Retrieved from Bloomberg terminal, WGDPINDI Index 

¹⁰⁸ Bloomberg L.P. Bloomberg India Market Cap as a Percentage of World Market Cap USD.  Retrieved from Bloomberg terminal, WPERINDI Index; The Economist. “The half-finished revolution”  (July 2011). Retrieved from http://www.economist.com/node/18986387 

¹⁰⁹ Reserve Bank of India. Handbook of Statistics on Indian Economy (September 2016), Table 243:  Select Debt Indicators of the Central and State Governments (As Percentage to GDP). Retrieved  from https://www.rbi.org.in/scripts/PublicationsView.aspx?id=17376 

¹¹⁰ World Bank. World Development Indicators (2017), Gross fixed capital formation, private sector  (% of GDP). Retrieved from http://data.worldbank.org/indicator/NE.GDI.FPRV.ZS 

¹¹¹ Including motorbikes (“two-wheelers”). Government of India, Ministry of Statistics and  Programme Implementation. Motor Vehicles – Statistical Year Book India (2016). Retrieved from  http://www.mospi.gov.in/statistical-year-book-india/2016/189 

¹¹² World Bank. World Development Indicators (2017), Air transport, passengers carried. Retrieved  from http://data.worldbank.org/indicator/IS.AIR.PSGR

¹¹³ Aiyar, Swaminathan. “25 years of reforms: Nehru built many strong institutions, almost all have  eroded” (July 2016). The Economic Times. Retrieved from  

http://economictimes.indiatimes.com/news/economy/policy/25-years-of-reforms-nehru-built-many strong-institutions-almost-all-have-eroded-says-swaminathan-aiyar/articleshow/53310256.cms ¹¹⁴ The World Bank, International Comparison program database (2017). GDP per capita based on  purchasing power parity. Retrieved from http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD ¹¹⁵ World Bank measures defined as the proportion of the population living on less than $3.10 or  $1.90 per day at 2011 purchasing power parity rates. The World Bank, Development Research  Group. Poverty and Equity Database (2016). Retrieved from  

http://iresearch.worldbank.org/PovcalNet/povOnDemand.aspx; Government of India, Planning  Commission. Report of the Expert Group to Review the Methodology for Measurement of Poverty  (2014). Retrieved from http://planningcommission.nic.in/reports/genrep/pov_rep0707.pdf; Datt,  Gaurav, Ravallion, Martin, and Murgai, Rinku. “Growth, urbanization, and poverty reduction in India”  (February 2016). World Bank Group, Poverty and Equity Global Practice Group, Working Paper  7568. Retrieved from http://documents.worldbank.org/curated/en/571221468197063793/Growth urbanization-and-poverty-reduction-in-India 

¹¹⁶ International Monetary Fund. IMF India BOP Current Account Exports Services (2016).  Retrieved from Bloomberg terminal, 5341R009 Index; International Monetary Fund. IMF India BOP  Current Account Imports Services (2016). Retrieved from Bloomberg terminal, 5341R010 Index ¹¹⁷ International Monetary Fund. India BOP Net Financial Account (2016). Retrieved from  Bloomberg terminal, 5343R001 Index 

¹¹⁸ International Monetary Fund. India Financial Account Portfolio Investment USD (2016).  Retrieved from Bloomberg terminal, B6INFP Index; International Monetary Fund. India Fin Acc  Balance Direct Investment USD (2016). Retrieved from Bloomberg terminal, B6INFD Index ¹¹⁹ Dua, Pami and Ranjan, Rajiv. “Exchange Rate Policy and Modelling in India” (February 2010).  Reserve Bank of India, Department of Economic Analysis and Policy, Development Research  Group. Retrieved from https://www.rbi.org.in/scripts/PublicationsView.aspx?id=12252 ¹²⁰ Bijoy, C. R. “India: Transiting to a Global Donor” (April 2009). Reality of Aid, Special Report on  South-South Cooperation 2010. Retrieved from http://www.realityofaid.org/wp 

content/uploads/2013/02/ROA-SSDC-Special-Report6.pdf 

¹²¹ Aiyar, Swaminathan. “Twenty-Five Years of Indian Economic Reform” (October 2016). The Cato  Institute, Policy Analysis No. 803. Retrieved from https://www.cato.org/publications/policy analysis/twenty-five-years-indian-economic-reform 

¹²² Boughton, James M. Tearing Down Walls: The International Monetary Fund, 1990-1999 (February 2012), Chapter 9: Five Fat Years: Recovery from the Debt Crisis, 1990-94. International  Monetary Fund. Retrieved from https://www.imf.org/external/pubs/ft/history/2012/pdf/c9.pdf ¹²³ Doshi, Vidhi. “How the East India Company became a weapon to challenge UK’s colonial past”  (May 2017). The Guardian. Retrieved from https://www.theguardian.com/world/2017/may/06/east india-company-british-businessman 

¹²⁴ Rajghatta, Chidanand and Sinhal, Prabhakar. “Full circle: India buys 200 tons gold from IMF”  (November 2009). The Times of India. Retrieved from  

http://timesofindia.indiatimes.com/business/india-business/Full-circle-India-buys-200-tons-gold-from IMF/articleshow/5194338.cms; Prasad, Adjit. “Reserve Bank of India – Bulletin Weekly Statistical  Supplement – Extract” (October 2017). Reserve Bank of India, Press Release No. 2017-2018/1087.  Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx 

¹²⁵ Panagariya, Arvind. India: The Emerging Giant (April 2010), Chapter 5: Phase IV (1988-2006):  Triumph of Liberalization. Oxford University Press. Retrieved from  

https://books.google.com/books?id=v78VDAAAQBAJ 

¹²⁶ The Economist. “The half-finished revolution” (July 2011). Retrieved from  

http://www.economist.com/node/18986387

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