India: Crisis, Reforms and Growth in the Nineties

The 1990s saw far-reaching changes in India’s economic policy. A severe balance of payments crisis at the beginning of the decade triggered wide ranging reforms in economic policy during the early nineties. These reforms brought about a swift turnaround in India’s external sector and catalysed an unprecedented spurt in economic growth during the five years 1992-97, coincident with the Eighth Plan period. Unfortunately, the programme of policy reforms lost momentum after 1995 and the early partial success with fiscal consolidation was reversed after 1996. Coupled with some deterioration in the international economic environment in the final years of the decade, these factors contributed to a clear deterioration in economic performance, especially growth, in the last four years 1997-2001. This paper seeks to improve our understanding of the fascinating story of crisis, reforms and growth in India during the nineties.