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.
