To the Brink and Back: India’s 1991 Story

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Authors: Jairam Ramesh
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detail by Montek Ahluwalia in a festschrift, published in honour ofP. Chidambaram, titled
An Agenda for India’s Growth
, edited by Sameer Kochhar (New Delhi: Academic Foundation, 2013).
    49 The Abid Hussain Committee on Trade Policies (1984) contained recommendations regarding import policies and export-promotion strategies—including the exemption of CCS.
    50 Takht Ram was a retired officer of the CCI&E who had spent years in that organization.

12
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The Curious Case of the Prime Minister’s9 July Speech
    he prime minister addressed the nation again on Doordarshan and over All India Radio on 9 July. 51 He may have felt that with Parliament about to begin the next day he needed to send political signals regarding his overall approach. Like in the past, he asked me for a draft. Having learnt my lessons well, I gave it to him in the full expectation that it would not be used one bit at all.
    I was pleasantly surprised. The speech the prime minister delivered was entirely in keeping with the draft I had given him. He said:
    When I spoke to you last, I promised quick and bold measures to restore our sick economy to health. We have taken the first step to fulfil that promise. This is the beginning. A further set of far-reaching changes and reforms is on the way.
    For the last eighteen months, there has been paralysis on the economic front. The last two governments postponed taking vital decisions. The fiscal position was allowed to deteriorate. The balance-of-payments crisis became unmanageable. Non-resident Indians and foreign leaders became more and more reluctant to lend money to India.
    Consequently, India’s external reserves declined steeply and we had no foreign exchange to import even such essential commodities as diesel, kerosene, edible oil and fertilizer. The net result was that when we came to power, we found the financial position of the country in a terrible mess.
    Desperate maladies call for drastic remedies. And that is what we have done. And that is what we will continue to do.
    Exchange Rate Adjustment
    The Reserve Bank changed the exchange rate of the rupee. This was done so that we can export more. More garments, more leather products, more gems and jewellery, more agricultural products made in India will be sold abroad. This will not only earn us foreign exchange but also create new employment at home.
    And why do we need to earn foreign exchange so badly? Not to import luxury items but to buy commodities like kerosene and diesel, fertilizers, edible oil and steel. We produce these commodities, but what we produce is not enough. We are stepping up our production, but for some time, we have to import.
    The adjustment in theexchange rate will discourage the import of non-essential goods. And will therefore save foreign exchange for the import of essential goods of mass consumption. It will also end uncertainty about the future of our currency and will encourage non-resident Indians to send more money to be deposited in their accounts in India.
    After changing the value of the rupee we undertook a major overhaul of the trade policy. Our message was simple—you cannot import if you do not export. We cut down on export licenses so that our exporters do not face hurdles. We eliminated subsidies so that the money saved could be better deployed in welfare and employment programmes.
    My objective is to make India truly self-reliant. Self-reliance is not a mere slogan for me. It means the ability to pay for our imports through exports. My motto is—trade, not aid. Aid is a crutch. Trade builds pride. And India has been trading for thousands of years.
    Friends, Rajiv Gandhi came to power in 1984. He first understood the need for India to change her traditional way of thinking and doing things. He realized that if India is to survive and prosper, fundamental economic reforms must be carried out. He did that. What we have done is a continuation of the policies initiated by him.
    Social and Economic Philosophy
    In

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