Describe the problems faced by the Indian economy during 1991.
Need atleast 5 points. Thanks!
Answers
Most countries in the world depend on the global economy for a wide variety of things. For India, we depend on West Asia for our oil, South Africa for our gold, US for our technology, South east Asia for vegetable oil etc. To buy these items from the world market, we need US dollars - the global currency of trade. The only way to earn dollars is by selling enough of our stuff in the global economy (exports).
Since 1960s, India depended on the Soviet Union for our exports - as we failed to develop good economic relationships with the US and Western Europe. It was a good going for a while (India and the Soviets) until the proverbial sh*t started to hit the fan. In late 1980s, Soviet Union started to crack and by 1991 they were split into 15 nations (Russia, Kazakhstan, Ukraine, etc). Now, India had a major problem because our primary buyer was in turmoil. Exports were down significantly. Dissolution of the Soviet Union
Meanwhile, there was this guy Saddam Hussein who had his misadventure into Kuwait in 1990. This led US to war with Iraq in early 1991. Oil fields started to burn and ships found it hard to reach Persian gulf. Iraq and Kuwait were our big suppliers of oil. The war led to destruction of our oil imports and the prices shot up substantially - doubling in a few months. Gulf War and 1990 oil price shock.
In the late 1980s India's political system was imploding. Prime Minister Rajiv Gandhi was involved in a series of troubles - Bofors scandal, IPKF misadventure, Shah Bano case that eventually led to his ousting in 1989. What followed were two more terrible leaders who were as unstable as they were incompetent. This had a huge effect on Indian economy that was totally forgotten in the political crisis. In 1991 this stop-gap government crashed. Until Narasimha Rao was sworn as Prime Minister in 1991, Indian economy was left in gross neglect.
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Thus, 1991 was the year of perfect storm. This triple crisis brought India on its knees. On one end, our primary buyer was gone. On the other hand, our primary sellers were in war. In the middle, our production was effectively stopped by political crisis. We were running out of dollars to buy essential items like crude oil and food from the rest of the world. This is termed a "Balance of Payments Crisis" - meaning India was not able to balance its accounts - exports were significantly less than imports.
Since, we didn't have many dollars, we went and begged the IMF - the pawn shop of the world. They asked us to pledge our gold reserves in return for the interim loan of $3.9 billion (a huge sum for India then) just as the neighborhood moneylenders ask for our gold when we want an emergency loan. We took 67 tons of our gold in two planes - one to London and other to Switzerland to get this assistance.
here you go brother write to your needs and shorten up if you want too