Economic Liberalisation

By mid-1991, India was days away from defaulting on its international debt. Foreign exchange reserves had fallen to just $1.2 billion — barely enough to cover two weeks of imports. In a secret operation, India airlifted 67 tonnes of gold to the Bank of England and Swiss National Bank as collateral for an emergency $600 million loan from the IMF.

The crisis forced a reckoning that had been deferred for decades. The new government under Prime Minister Narasimha Rao, with Finance Minister Manmohan Singh, launched sweeping economic reforms: dismantling the License Raj, devaluing the rupee in two steps from ₹17.90 to ₹25.83 per dollar, opening the economy to foreign investment, reducing import tariffs, and privatising parts of the public sector. The gold pledge was quietly repatriated as foreign exchange reserves recovered.

The reforms transformed India's economic trajectory. GDP growth accelerated, exports diversified, technology companies emerged, and the stock market — the Sensex — began its long multi-decade climb from around 1,000 points to over 80,000 by 2026.

The 1991 crisis and its resolution is considered the single most important economic turning point in post-independence India — the moment when the state-controlled economy gave way to the market-oriented growth model that would make India one of the world's fastest-growing major economies.