The budget announced by Manmohan Singh for the year 1991-92 remains one of the most reformative budgets the country has ever witnessed.
Manmohan Singh presented the budget on July 24, 1991, and announced some tough measures to free up fiscal space, the first step to liberalizing India’s economy.
While two-time finance minister Yashwant Sinha’s quick thinking helped India initially stand guard against the Balance of Payments (BoP) crisis in 1990-91, it was Manmohan Singh who fixed the economy and ushered in a new era of economic development.
Reformative Changes Introduced.
Manmohan Singh then proposed foreign investment and use of foreign technology to increase productivity and ensure rapid modernization of India’s financial and public sectors.
Singh also introduced various structural reforms, shattering barriers that limited industrial growth.
A key change in export/import policy, aimed at reducing import licensing, vigorous export promotion and optimal import compression, was also introduced.
Singh also announced handsome tax incentives for exporting companies to provide a boost to slow industrial productivity. Restructuring of key interest rates was also proposed for certain schemes and investments to reduce nominal and real interest rates.
Singh introduced packages for comprehensive development of village-level enterprises. Several trade policies were also introduced to boost exports. A number of stricter tax reforms were also announced by Manmohan Singh, leading to better direct tax collection.
He also announced the constitution of two committees that were to change the face of India: one on financial sector reforms that were headed by M. Narasimham and the other headed by Raja Chelliah to prepare a road map for reducing import duties.
India had escaped the clutches of the growing economic crisis by 1992-93 and was slowly heading towards an era of rapid growth. By the time Manmohan Singh presented the budget for the year 1992-93, a sharp moderation was seen in fiscal deficit and inflation while foreign reserves grew sharply.
