nd str and n rastr           t re         9.9
     external events (the Gulf war, 1990–91) vitiated                (ii) Sharp decline in the private remittances
     the situation, too. Finally, by the end of 1980s                       from the overseas Indian workers in the
     India was in the grip of a severe balance of payment                   wake of the Gulf War24, specially from
     crisis with higher rate of inflation (over 13 per                      the Gulf region.
     cent) and higher fiscal deficit (over 8 per cent).22          (iii) Inflation peaking at nearly 17 per cent.25
     The deep crisis put the economy in a financial                 (iv) The gross fiscal deficit of the Central
     crunch, which made India opt for a new way of                          Government reaching 8.4 per cent of the
     economic management in the coming times.                               GDP.26
                                                                     (v) By the month of June 1991, India’s
        new IndustrIal PolIcy, 1991                                         foreign exchange had declined to just two
     It were the industrial policies of past which had                      weeks of import coverage.27
     shaped the nature and structure of the Indian                    India’s near miss with a serious balance of
     economy. The need of the hour was to change                payments crisis was the proximate cause that
     the nature and structure of the economy by early           started India’s market liberalisation measures in
     1990s. The Government of India decided to                  1991 followed by a gradualist approach.28 As the
     change the very nature of the industrial policy            reforms were induced by the crisis of the BoP,
     which will automatically lead to change in the             the initial phase focussed on macroeconomic
                                                                stabilisation while the reforms of industrial
     nature and scope of the economy. And here came
                                                                policy, trade and exchange rate policies, foreign
     the New Industrial Policy of 1991.
                                                                investment policy, financial and tax reforms as
          With this policy the government kickstarted           well as public sector reforms did also follow soon.
     the very process of reform in the economy, that
                                                                      The financial support India recieved from the
     is why the policy is taken more as a process than a
                                                                IMF to fight out the BoP crisis of 1990–91 were
                                                                having a tag of conditions to be fulfilled by India.
     Background: India was faced with severe balance            These IMF conditionalities required the Indian
     of payment crisis by June 1991. Basically, in early        economy to go for a structural re-adjustment.
     1990s, there were inter-connected set of events,           As the nature and scope of the economy were
     which were growing unfavourable for the Indian             moulded by the various industrial policies India
     economy:                                                   did follow till date, any desired change in the
           (i) Due to the Gulf War (1990–91), the                 24.    Jeffrey D. Sachs, Ashutosh Varsheny and Nirupam
                 higher oil prices were fastly23 depleting               Bajpai, India in the Era of Economic Reform ew
                 India’s foreign reserves.                                 elhi xford niversity ress,           , p. .
                                                                  25.    Department of Economic Affairs, ‘Economic Reforms:
       22.    Vijay Joshi and I.M.D. Little, India’s Economic            Two Years After and the Task Ahead’, Discussion
              Reforms, 1991–2001, xford Clarendon ress,       ,           aper ew elhi overnment of ndia,                , p. .
              p. 17.                                              26.    Ibid.
       23.       inistry of inance, conomic Survey                27.    Bimal Jalan, India’s Economic Crisis: The Way Ahead,
                 ew elhi overnment of ndia,             inistry             ew elhi xford niversity ress,            , pp.      .
              of inance, conomic Survey               ew elhi     28.    Sach, Varseny and Bajpai, India in the Era of
                overnment of ndia,     .                                 Economic Reforms, p. 2.