1991 Indian economic crisis

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The 1991 Indian economic crisis was a balance-of-payments crisis in which India's foreign-exchange reserves fell to a level barely sufficient to pay three weeks of imports. It followed a decade of large fiscal deficits and rising external borrowing and came to a head in 1990-91 because of rising oil prices during the Gulf War, political instability that prevented the government from passing the budget, and a loss of investor confidence. India avoided default by borrowing from the International Monetary Fund and by pledging part of its gold reserves as collateral for loans from foreign banks. In June 1991, the rupee depreciated sharply due to low foreign exchange reserves, further worsening the twin deficit problem. The crisis led the government of P.V. Narasimha Rao, with Manmohan Singh as finance minister, to begin a programme of economic liberalisation in July 1991: the rupee was devalued by about 18%, industrial licensing was largely dismantled, import licensing was reduced, and more...

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