The 1991 balance-of-payments crisis and the launch of liberalization

By mid-1991, India's foreign-exchange reserves had fallen to a level covering barely two weeks of essential imports, the result of a widening current-account deficit driven by the oil-price spike following the Gulf War, sluggish export growth, and a loss of confidence among foreign lenders that triggered capital flight. The Reserve Bank of India, under Governor S. Venkitaramanan, took the emergency step of airlifting tonnes of gold reserves to the Bank of England and the Union Bank of Switzerland as collateral to secure bridge financing while the government simultaneously negotiated a $2.2 billion IMF loan, pledging gold as part of the arrangement. The RBI's own multi-volume institutional history documents this episode as both 'The Balance of Payments Crisis of 1991' and its subsequent 'Management and Resolution,' describing how the near-default experience forced a decisive break from decades of import substitution and licensing controls. The crisis directly precipitated the 1991 reforms under Finance Minister Manmohan Singh, including devaluation of the rupee, abolition of industrial licensing for most sectors, and the opening of the economy to foreign investment, reshaping India's growth trajectory for the following three decades.