INDIA REAPS WHAT SARDAR SOWED IN 1991.

‘His legacy to encourage India to create wealth by combining efficiency with austerity will live on’.

India mourns the passing of a stalwart, the Sardar of reforms who visualized India as a major economic power of the world. An idea he endorsed the August House of 1991 to believe in and assured that the country would prevail and overcome the economic instability. What Sardar sowed in 1991,  marked a big leap in the economy in India and went on to reap the fruits for the country till date.

Dr. Manmohan Singh was born and raised from humble background in undivided Punjab (now in Pakistan) on September 26, 1932.  He started as an academician in economics earning himself a Doctorate in Economics from Oxford. A soft spoken gentleman with great stature and value. He emerged in the spotlight of Indian politics when he was introduced as a Finance Minister by the then Prime minister Mr. Narsimah Rao in 1991.

From July 1990 to January 1991, India was facing a troubled economy due to a sharp decline in capital inflows through commercial borrowing and non-resident deposits. Despite large borrowings from the International Monetary Fund there was still a sharp reduction in foreign exchange reserves and the country was on the verge of losing financial stability.

THE BUDGET OF 1991.

When Dr. Manmohan Singh debuted the budget session in 1991, it sent a skeptical cheer among the parliamentarians but who knew that his economic plan would architect the financial pathway of the country over the years to come.

Liberalization, Privatization and Globalization.

The main focus of the 1991 budget was to introduce foreign investors in India. He welcomed the Liberalization, Privatization and Globalization system to Indian economy with direct foreign investments that would provide access to capital, technology and markets which would expose the Indian industrial sector to competition from abroad in a phased manner focusing on Cost, efficiency, and quality.

Liberalization of direct foreign investment was to be done in three phases.

1. Direct foreign investment in specified high priority industries, with a raised limit for foreign equity at 51 per cent, would be given prompt approval, if equity inflows are sufficient to finance the import of capital goods at the stage of investment and if dividends are balanced by export earnings over a period of time.
2. Foreign equity up to 51 per cent would be allowed for trading companies primarily engaged in export activities
3. A special board would be constituted to negotiate with a number of large international firms and approve direct foreign investment in selected areas; this would be a special regime to attract substantial investment that would provide access to high technology and to world markets.

Modernize Indian Financial sector through Foreign Investments

Macro-economic stabilization and fiscal adjustment alone cannot suffice. They must be supported by essential reforms in economic policy and economic management, as an integral part of the adjustment process, reforms which would help to eliminate waste and inefficiency and impart a new element of dynamism to growth processes in our economy. The thrust of the reform process would be to increase the efficiency and international competitiveness of industrial production, to utilize for this purpose foreign investment and foreign technology to a much greater degree than we have done in the past, to increase the productivity of investment, to ensure that India’s financial sector is rapidly modernized, and to improve the performance of the public sector, so that the key sectors of our economy are enabled to attain an adequate technological and competitive edge in a fast changing global economy. I am confident that, after a successful implementation of stabilization measures and the essential structural and policy reforms, our economy would return to a path of a high sustained growth with reasonable price stability and greater social equity.

Cut reduction in Government expenditure

He compared and adjusted the fiscal deficits and underlined the non-planned expenditure that had accumulated through borrowings and recommended lower fiscal and revenue deficit reduce non-planned expenditure at least by 10% for the next coming years. These reductions included interest payments, limiting defense expenditure,

Liberalization of Public Sector Undertakings.

The investments in PSU’s needed a revamp and in order to raise resources for the public sector, the budget provided to offered 20 percent of government equity in selected PSU to mutual funds and investment institutions of the public sector which would help bridge the financial gap that had hindered the PSUs. n

Reforms in Banking and Financial Institutions.

He set up a high level committee (Narsimhan committee) to consider all relevant aspects of the financial system and advise the Government on appropriate measures that would preserve its basic role as an essential adjunct to economic growth and competitive efficiency, while improving the health of its institutions. He introduced comprehensive review of policies and procedures towards Non- resident Indian investments and provided general exemptions for the NRI’s to set up industrial and other ventures in India.

Introduced SEBI.

He introduced Securities and Exchange Board of India for administering the relevant provisions of the Securities Contracts (Regulation) Act and the Companies Act. By transferring these powers from the Controller of Capital Issues and the Government to an independent body would enable it to effectively regulate, promote and monitor the working of the Stock Exchanges in the country. 

Other economical reforms.

Apart from the LPG, He increased the price on fertilizers for the farmers but at the same time compensated them by  increasing the procurement price of the products and further ensured to invest 50 % of the plan resources are invested in the agriculture and the rural sector. He also carried out a series of policies reforms which included deregulation of industrial market, financial sector reforms, tax reforms, removal of license Raj, dis-investments etc with the sole aim to cut down governments expenditure and stabilize the finance. He also removed excised duties from Agro based industry products thereby boosting the economy and increasing employment in these sectors and further educed the import duty and provided concessions to selected raw materials.

"INDIA MUST CREATE WEALTH."

This was one of the major agenda and an important message which he intended to highlight and share. He encouraged to reform the attitude of the common people of India towards wealth and he remarked that ‘all wealth is a social product. Those who create it and own it, have to hold it as a trust and use it in the interest of the society, and particularly of those who are under-privileged and without mean.’

Development is to reform from the productive needs like drinking water, education, health, shelter and other basic necessities first, to reform development has to combine efficiency with austerity for it is a way of holding our society together in pursuit of the noble goal of banishing poverty, hunger and disease from this ancient land of ours.

Under his guidance as finance minister, India's GDP increased from 1.1 % to 7.5% in the early 2000 . He went on to become one of the longest serving Prime Minister of India and under his leadership India set out to be one of the growing economy in the world with its GDP at 9%.

 INDIA THE 5th LARGEST ECONOMY IN THE WORLD

The FDI policy has changed significantly since 1991, and is more investment friendly which has attracted more foreign investor to India. Recently, India has achieved a remarkable milestone in its economic journey, with gross foreign direct investment (FDI) inflows reaching an impressive $1 trillion since April 2000. This landmark achievement was bolstered by a nearly 26% rise in FDI to $42.1 billion during the first half of the current fiscal year. Such growth reflects India’s growing appeal as a global investment destination, driven by a proactive policy framework, dynamic business environment, and increasing international competitiveness. Many countries like USA, Singapore, Mauritius, Japan, Netherlands etc are top investors in India and some notable foreign companies that have invested are Amazon, Walmart, Google & Meta, Foxconn, Apple etc.

Today, India is the 5th largest growing economy in the world with its GDP at 7% and is robust on becoming the 3rd largest economy in the world by 2030.

CONCLUSION

Manmohan Singh’s methods and plans have often been criticized for not being socialist enough in terms of wealth generation and for neglecting certain sectors like agriculture which comprised of 50% of industry in India. His soft leadership has also often been question for being ‘accidental.’ The ‘Accidental Prime Minister’ many critically labeled him but the fruits of his labor are being relished and benefitted by India at present.

Yes, indeed a true Sardar of economic reforms of India but above all, A staunch patriot and a charismatic leader who, with his eloquence and wit let his actions speak louder than his words. His legacy is an example to the leaders of this country which will always be revered and respected for he proved to be not the ‘Accidental Prime minister’ but the ‘Quintessential Prime minister.’

Thank you Sardarji.