Rao is the cleverest Prime Minister India has had– James Manor


The 10th Lok Sabha Elections were held in two stages in June 1991 IN
the midst of election campaign, 46 year old Raj iv Gandhi was assassinated ON 21 May 1991 at Sriperumbhudur, near Chennai, Tamil Nadu.’ The election was fought between three coalition of parties;

1) The Congress, the AIADMK and four other smaller parties;

2) The BJP and the Shiv Sena; and

3) The Janata Dal led National Front along with the CPM-Ied Left Front.

The Congress emerged as the single largest party with 232 seats, increased to 251 through an alliance with its supporting parties.’ The BJP alliance accounted for 123 seats. The combined strength of Janata Dal alliance was 140 seats. In this election, many Muslim voters decided to vote in each constituency for a secular party which was in a position to defeat the BJP.

The assassination of Rajiv Gandhi swung sympathy votes to Congress.’ In the absence of national alternative,  Congress was the only party with a base all over the country to form the  government.


Party President


The Congress unanimously declared Sonia Gandhi as its President. But she refused to accept the post.” Narain Dutt Tiwari, Arjun Singh, Sharnd Pawar and Narasimha Rao were the aspirants for the top post of the party.  The Congress Parliamentary Party (CPP) unanimously elected Rao as its leader (20 June). “When Sonia Gandhi learnt that Rao had been chosen to lead the party she did not oppose his candidature”.


An erudite scholar and an enviable multi-linguist, Rao was a pragmatic politician. As Congress President, he was punctilious about ends and means for him ends justified means! He was a firm believer in the adage ‘politics is the art of the possible’.



Minority Government

P.V.Narasimha Rao, leader of the single largest Congress Party, was able to form the Ministry by himself and he was charged with the responsibility of running the country. He was the first Prime Minister from the South and well- versed in Hindi. He headed a minority government and his prolonged political  and administrative experience coupled with his close contact with political parties and  leaders helped him, in no small measure, to govern the country. “In his first year, Rao was more like a trapeze artist in a circus”.


On 20 June 1991, Narasimha Rao was appointed Prime Minister by President R.Venkataraman and the next day he, along with 57 ministers, were administered the oath of office. The ministry making left lot of bitterness behind. for instance, Madya Pradesh with 14 MPs had 3 cabinet ministers and a minister of sate; Andhra had 7 ministers, and Tamil Nadu, where the Congress and its allies had secured cent percent seats had no cabinet minister and some regions were totally neglected. Rao formed a minority government, managed to have a majority in the Lok Sabha and lasted a full five-year term. After the defeat of  the congress inthe 1989 elections; three minority governments followed in
sucesssion: 1) National Front government of Y.P.Singh, 2) the short-lived government of Chandrashekar, and 3) P. V.Narasimha Rao’s government.


New Economic Policy

Economic Crisis


Rao Government had to face the worst ever economic crisis in independence. The crisis had been simmering from the mid-1980s, ever sin the successive governments, instead of managing macro-economy, WOI feathering their nests by relying heavily on domestic and foreign borrowing Added to this was the steep rise in oil prices, consequent on the Iraqi invasion of Kuwait. As a result, the country had to face a crisis of high fiscal deficlt,
escalating inflation and setback to balance of payments, leading to a rapid depletion offoreign exchange reserves.


In 1991, the ratio of the central government’s fiscal deficit to GDP  reached an all-time high with 8.3%. The rate of inflation touched a peak of 17% and foreign exchange (forex) reserves dropped to a meager one billion dollars, This reserve amount was enough just to meet only about two weeks of imports ! “India was at the edge of a precipice, it could have even become a defaulter in meeting its international fmancial commitments. In other words, India was facing bankruptcy and insolvency.’ A shameful situation indeed.


Economic Reforms

Dr.Manmohan Singh, Finance Minister, rose up to the occasion and
decided to take the bull of economic crisis by its horns. Dr.Singh, a Congress
outsider, had an enviable academic track-record and enriched experience as
Secretary General in the South-South Commission and he had inside knowledge
of the international fmancial institutions. His priority was to correct major
distortions and deficiencies in the economic system.
He inherited the unenviable
legacy of the industrial policy pursued with a vengeance from 1965 to 1990, with
a solitary exception of limited liberalization in the 1980s, resulting in crippled
capacities, stagnated productivity, prohibitively high cost in-efficient industrial
structure, burdensome import substitution and ‘export pessimism’. In short.
India’s rigid industrial and import substitution policies resulted in structural
rigidities. The causality was erosion of economic competitiveness, and the
resultant stagnation of economic growth. So, Dr.Manmohan Singh embarked
on the course of Libera lis at ion, Competition and Globalisation.


Economic Measures
‘evaluation of Rupee

On 9 July 1991, Shivraj Patil, who was the Deputy Speaker of the previous  Lok Sabha was unanimously elected Speaker of the tenth Lok Sabha, with the support of BJP, the main opposition party. On 12 July, Rao Government got the confidence motion passed by 241 votes to 111. Strengthened by the confidence vote, the Rao Government successfully negotiated IMF loan to tide over the forex crisis. Then the finance minister, Dr.Manmohan Singh, directed the Reserve Bank ofIndia (RBI) to reduce the value of the rupee by 83% at one stroke and then another dose of devaluation by 11.3%. The Finance Minister also formulated a scheme for bringing down the deficit by drastically cutting subsidies on
food, fertilizer, petrol etc. Dr.Singh was “valiantly struggling to keep the sinking
economy afloat”.” Manmohanamics saved the situation.


Budget for 1991-92


The budget for 1991-92, presented by the Finance Minister, contained two controversial proposals. 1) Withdrawal of subsidies on fertilizer, and 2) a grant of Rs.100 crores, spread over five years, to the Rajiv Gandhi Foundation. II Both the proposals provoked strong reaction. Sonia Gandhi, chairperson of the Trust, declined the grant proposed in the budget. The budget was fmally passed when the Finance Minister had agreed to reduce the proposed subsidy cut of 40% to 30%. Rao’s minority government survived one more crisis.


Dismantling Controls

The Government ofIndia got standby loan of two billion-two hundred  million dollars – from the IMF. Simultaneously, the Government initiated a  series of far-reaching economic measures that permitted multinational corporations and companies to hold 51 % – instead of 40% – of the stock of Indian subsidiaries. These measures made direct foreign investnient possible In 34 major Indian industries, including transportation, food processing, tourism

and the manufacture of electrical equipment. The devaluation of the rupee encouraged the foreign investors and Indian exporters. The economic reform easures constituted an important step towards dismantling the stifling socialist controls on the economy.

Paradim Shift

The transition from state controlled socialist economy to market-driven liberalized economy was a ‘paradigm shift’ in independent India. Sweeping changes had been made since July 1991. These changes covered industry trade, tariff, investment, finance and tax policies. The objectives of the economic policy were: 1) to deregulate the economy; 2) to reduce the role of the public reactor; 3) to unleash private initiative and enterprise; 4) to accelerat
economic growth; 5) to meet the challenges of global competitiveness, and 6) to ensure social justice and equity.