| dbo:abstract
|
- The 1991 Indian economic crisis was an economic crisis in India resulting from a balance of payments deficit due to excess reliance on imports and other external factors. India's economic problems started worsening in 1985 as imports swelled, leaving the country in a twin deficit: the Indian trade balance was in deficit at a time when the government was running on a huge fiscal deficit. The collapse of the Soviet Bloc, with which India had rupee exchange in trade, also caused problems. By the end of 1990, in the run-up to the Gulf War, the dire situation meant that the Indian foreign exchange reserves could have barely financed three weeks' worth of imports. Meanwhile, the government came close to defaulting on its own financial obligations. By July that year, the low reserves had led to a sharp depreciation/devaluation of the rupee, which in turn exacerbated the twin deficit problem. The Chandrasekhar government could not pass the budget in February 1991 after Moody downgraded India's bond ratings. The ratings further deteriorated due to the unsuccessful passage of the budget. This made it impossible for the country to seek short term loans and exacerbated the existing economic crisis. The World Bank and IMF also stopped their assistance, leaving the government with no option except to mortgage the country's gold to avoid defaulting on payments. In an attempt to seek an economic bailout from the IMF, the Indian government airlifted its national gold reserves. The crisis, in turn, paved the way for the liberalisation of the Indian economy, since one of the conditions stipulated in the World Bank and IMF loan (structural reform), required India to open itself up to participation from foreign entities in its industries, including its state-owned enterprises. The program of economic policy reform which was put in place in 1990 has yielded good results, dramatically improving the quality of life in India. It also resulted in a large increase in inequality with the income share of the Top 10% of the population increasing from 35% in 1991 to 57.1% in 2014. Likewise, the income share of the Bottom 50% decreased from 20.1% in 1991 to 13.1% in 2014. (en)
|
