1991 Crisis: Devaluation of Rupee

The past few weeks have seen a lot happening in the world economy; Russia-US sanctions, European crisis scare with Italy slumping into recession, Argentina debt default and the Reserve Bank of India Governor Raghuram Rajan cautioning about another global financial crisis. These events lead to a round of discussions with my friends. One such discussion was about the 1991 Economic Crisis of India.

There was a huge current account deficit and the coffers were empty. One major cause of current account deficit was imports being more than the exports. There wasn’t enough foreign exchange left even to import even 3 weeks of supply. So in 1991, former PM and the then Finance Minister Manmohan Singh, in his historic budget, brought liberalization reforms and devalued the rupee twice in 3 days.

While most of my friends had a fair idea about the LPG policy, the continual reforms and their impacts on Indian economy, just a few knew that the Indian currency ‘Rupee’ was devalued and even fewer knew ‘why?’

In this post, I have tried to shed some light on this lesser known event of the 1991 Crisis, the devaluation of rupee.

Argentina Debt Default Decoded

What is Argentine debt crisis?

Argentina has a dubious history of failing to repay the foreign exchange debt and bonds and had defaulted for 7 times in history. After missing an interest payment on its bonds on June 30, the country had a 30 day grace period to reach a settlement with its holdout creditors — mostly the hedge fund Elliott Management — in order to avoid default. That grace period was up on Wednesday and Argentina defaulted for eighth time on Thursday, 31^st July 2014.

Russia versus The West. Is it a Duel or a Mexican Standoff?

The MH17 crash in the Ukrainian skies has made the Russia-Ukraine crisis very serious. US has imposed heavy sanctions on Russian banks and energy companies. Europe may follow suit, although unwillingly. Here is a brief analysis of the sanctions and their effects on the World Economy.

The New Development Bank

The BRICS leaders met in Brasilia on 15^th July 2014 and signed the long anticipated document to create the $100 billion BRICS Development Bank and a reserve currency pool worth over another $100 billion. Documents on cooperation between BRICS export credit agencies and an agreement of cooperation on innovation were also inked.