Context: 

This editorial is based on the news “Mandal, Mandir, and now Market” which was published in the Hindu. Recently, the Bharat Ratna, India’s highest civilian award, was conferred on former Prime Minister PV Narasimha Rao. This article highlights his significance for India.

PV Narasimha Rao and His 1991 Economic Reforms

• PV Narasimha Rao was the 9th Prime Minister of India (1991-1996).

• He was also the first Prime Minister from southern India.
• He was the Chief Minister of Andhra Pradesh from 1971-73.
• Renowned for:  His intellectualism, political acumen, and leadership during a tumultuous era.
• Vision: Liberalization, deregulation and global integration to spur growth.
• 1991 Economic Reforms: In 1991, during the economic crisis, the foreign reserves fell to $1 billion (just 2 weeks of imports), high inflation (13%) looming default.
  • Devaluation of rupee by 18% against US Dollar in two tranches (9% & 11%).
• New Industrial Policy: Abolished industrial licensing (except 18 industries related to security/strategic concerns), allowed up to 51% FDI across sectors.
• Slash in Fiscal Deficit: From 8.4% in 1990-91 to 6.4% in 1991-92 by cutting subsidies.
• Examples of Subsequent Reforms: Insurance sector opened to private companies. 
  • Example- LIC market share reduced from 100% to 75%.
• Telecom privatized: VSNL monopoly ended and mobile phone revolution started.
• Disinvestment of Loss: Making PSUs like BALCO, Hindustan Zinc, IPCL, VSNL, etc.
• Peak import duties Reduced: From over 300% in 1991 to 50% by 1997.
• Impacts Observed:
  • Immediate (1991-93) Impacts: Stabilized economy, averted sovereign default and attracted $7 billion FDI.
  • Long-term Impacts: Laid foundation for over 6% average GDP growth during 1994-2019.
  • Criticisms Impacts: Inequality increased in the 1990s and reforms viewed as pro-rich and anti-poor.

PV Narasimha Rao And His Shifting Gears On Foreign Policy

• Moved away from rigid Cold War-era alignments and seeking engagement with all nations based on national interests.
  • Example: India abstained from voting against Iraq in the UN Security Council regarding its invasion of Kuwait, despite US pressure.
• Ending Estrangement: Formally established diplomatic ties with Israel in 1992.
  • Opened trade and technology cooperation, benefiting India’s defense and agriculture sectors.
  • Example: Israel helped India modernize its air force with Phalcon AWACS systems.
• Looking East: Launched the “Look East Policy” in 1991, fostering closer economic and strategic ties with Southeast Asian nations.
  • Joined ASEAN in 1991 and actively participated in regional forums, boosting trade and investment.
  • Example: India signed free trade agreements with Thailand, Singapore, and Malaysia.
• Building Bridges with the US: Improved relations, moving from Cold War hostility to a strategic partnership.
  • Visited the US in 1994, the first Indian Prime Minister to do so in 16 years. Signed key agreements on nuclear non-proliferation, trade, and technology transfer.
  • Example: The US removed India from its watchlist for nuclear proliferation.
• China Engagement: PV Narasimha Rao visited China in 1993, the first Indian Prime Minister to do so since the 1962 war.
  • Normalized relations, focusing on trade and confidence-building measures.
  • Resolved border disputes peacefully through negotiations.
  • Example: India and China signed an agreement on maintaining peace and tranquility along the Line of Actual Control (LAC).
• Regional Cooperation: Signed the South Asian Preferential Trade Agreement (SAPTA) in 1993 to boost regional trade and economic integration.
  • Promoted cross-border cooperation in areas like transportation and water resources.
  • Example: India signed bilateral trade agreements with other South Asian nations, increasing regional trade by 20%.

PV Narasimha Rao’s Contribution On India’s Social Sector Growth

• Education and Health: Emphasized on improving the quality of education and healthcare infrastructure, although these areas saw limited progress compared to economic reforms.
• Decentralization: By 73rd and 74th Constitutional Amendments, empowered local bodies with more autonomy to enhance grassroots democracy.

PV Narasimha Rao’s Political Mastery

• Managing Coalition Politics: Skillfully navigated the complexities of coalition politics, setting a precedent for future coalition governments in India.
• Handling of National Crises: PV Narasimha Rao played a crucial role in managing internal security issues, notably in Punjab and Kashmir, striving to restore peace and order.
• Security Achiever: He was fairly successful in controlling the separatist movements in Punjab and Kashmir.

PV Narasimha Rao’s Overall Legacy 

• Accidental Prime Minister who rose to the occasion during a critical juncture.
• Architect of India’s economic liberalization, paving the way for growth.
• Skilled diplomat who navigated complex foreign policy challenges.
• Effective crisis manager who tackled internal security threats and regional conflicts

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