'I would be sacked': How Narasimha Rao and Manmohan Singh put together a Budget that transformed India

On July 24, 1991, India, teetering on the brink of economic collapse, took a bold leap forward under the then Prime Minister Narasimha Rao and Finance Minister Manmohan Singh. The budget they put together marked the beginning of a journey that propelled India onto the global economic stage.

In 1991, India faced a daunting economic crisis: dwindling foreign reserves, skyrocketing oil prices due to the Gulf War, and a fiscal deficit that threatened to cripple the nation's economy. 

Amidst this turmoil, Rao, a seasoned politician with socialist leanings, was poised to retire to a life of asceticism. He was on the verge of joining the Sri Siddheswari Peetham, a monastic order in Tamil Nadu.

However, fate had other plans. Rao was called upon to lead the country as Prime Minister, a role that would challenge his long-held beliefs and thrust him into the spotlight as an unexpected reformer.

Vinay Sitapati, in his biography "Half Lion," paints a vivid picture of Rao’s transformation. According to Sitapati, there was nothing in Rao’s political past that suggested he would spearhead economic liberalization. Even Singh was taken by surprise. 

"I had no inkling that Rao was in favor of liberalization based on his past record," Singh admitted.

Jairam Ramesh, who served in Rao’s PMO during 1991, remembers their meeting the day after Rao became Congress president. "He told me he wasn't an expert on economic issues," Ramesh writes in his book, "To The Brink and Back: India’s 1991 Story". 

Rao was elected as the leader of the Congress Parliamentary Party (CPP) on 20 June 1991. On the evening of 20 June, (then cabinet secretary) Naresh Chandra met him and handed over a top-secret eight-page note highlighting the urgent tasks awaiting the new prime minister. While the note had been prepared by different ministries, especially the finance ministry, it was the cabinet secretary who finally put it all together. When he saw the note, Rao's first response was: 'Is the economic situation that bad?' To this, Naresh Chandra's reply was, 'No, sir, it is actually much worse,' Ramesh recalls in his book.

Under Rao and Singh, India then decided to embark on a series of reforms that would reshape its economic future. The 1991 budget, presented by Singh, was a testament to these reforms. It included measures such as devaluation of the rupee, trade liberalisation, and the dismantling of bureaucratic hurdles that had stifled growth for decades.

Reflecting on those turbulent times, Manmohan Singh, in "Strictly Personal: Manmohan and Gursharan" by Daman Singh, recalled a lighter moment amidst the seriousness of their task: "He [Rao] also jokingly told me that if things worked well, we would all claim credit, and if things didn't work out well, I would be sacked."

This collaboration between Rao and Singh, described as unconventional yet remarkably effective, laid the foundation for India's emergence as a global economic powerhouse.

The 1991 Budget not only addressed immediate fiscal challenges but also set in motion a wave of reforms that encouraged foreign investment, streamlined trade policies, and modernised industrial practices. It signalled India's readiness to embrace the global economy while safeguarding the interests of its most vulnerable populations.

As Singh put it in his budget speech, "No power on earth can stop an idea whose time has come. I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now wide awake. We shall prevail. We shall overcome."