: A former RBI Governor offers crucial insights into the pathbreaking economic reforms of the 1990s #IndiaNEWS 1990-91 was perhaps one of the worst years that the Indian economy had to face. The deteriorating

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A former RBI Governor offers crucial insights into the pathbreaking economic reforms of the 1990s #IndiaNEWS

1990-91 was perhaps one of the worst years that the Indian economy had to face. The deteriorating BOP situation got worse because of certain global developments. The possibility of default in our external payments loomed large. Even though policymakers strived hard to avoid such a situation, a contingency plan was still prepared. Eventually, that calamity was avoided. In fact, the end of the crisis saw a new beginning. The break with the past saw a new dawn.As mentioned already, the current account deficit of 1989-90 was 2.3 per cent of GDP. The major global shock came with the invasion of Kuwait by Iraq in August 1990. It lasted seven months. Compounding this were the recessionary conditions and slowdown in world trade. On top of these came the break-up of the Soviet Union with which India had a special trade arrangement. The share of Eastern Europe in India’s exports was as high as 22 per cent at that time.The first impact of the Gulf War was on India’s petroleum, oil and lubricants (POL) import bill. Crude oil prices doubled initially from per barrel to per barrel. Thereafter, towards the end of the year, it declined to per barrel....Read more

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