Indian Prime Minister Manmohan Singh said India will not be experiencing a replay of the 1991 economic crisis. The Economic Times website published a Press Trust of India report where Singh said, "There is no question of going back to 1991." The Prime Minister referred to the crisis brought about by the balance of payments that year. At that time, India had to pledge its gold to settle its bills. Then, India also only had enough reserves to pay for three weeks of imports. The crisis prompted the country to open up its economy as part of its reform measures.
Singh cited two reasons why India will not be doing a repeat of 1991 despite the slowest growth it has experienced in a decade. The first was that its currency was now connected to the market. "At that time foreign exchange in India was a fixed rate. Now it is linked to market. We only correct the volatility of the rupee," he explained. The second reason was that India has enough foreign exchange reserves.
The Prime Minister, however, acknowledged that increased investments of "unproductive assets" like gold had contributed to the country's increasing current account deficit.
Join the Conversation