India's balance-of-payments crisis and liberalization

By mid-1991 India's foreign exchange reserves had fallen to barely enough to cover about two weeks of imports, following years of fiscal deficits, the Gulf War oil-price shock, and a loss of remittances from Indian workers in the Gulf. The government airlifted gold reserves to London as collateral for an emergency loan and, under finance minister Manmohan Singh, accepted IMF conditions in exchange for support. The crisis became the catalyst for reforms that dismantled the 'License Raj' system of industrial permits, devalued the rupee, cut import tariffs, and opened the economy to foreign investment. The 1991 reforms are widely credited with setting up three decades of much faster Indian growth than the pre-reform era.