The Narsimha Rao Government refers to the administration led by P.V. Narasimha Rao, who served as the 9th Prime Minister of India from 1991 to 1996. His tenure marked a significant period in India's history, characterized by major economic reforms and significant policy shifts. Rao, a seasoned politician from the Indian National Congress, took office in a time of economic crisis and political instability. His leadership is often credited with initiating the liberalization of the Indian economy, which transformed the country's economic landscape and set the stage for rapid growth and globalization.

Rao's government introduced several landmark policies aimed at dismantling the License Raj, reducing trade barriers, and encouraging foreign investment. These reforms were spearheaded by his Finance Minister, Dr. Manmohan Singh, who later became the Prime Minister of India. The Narsimha Rao administration also focused on improving India's foreign relations and addressing internal security challenges. Despite facing significant political challenges and opposition, Rao's tenure is regarded as a pivotal period that laid the foundation for modern India's economic policies and growth trajectory.

Crisis

The Narsimha Rao Government came to power in 1991, at a time when India was grappling with a severe economic crisis. The country faced a balance of payments crisis, characterized by a steep decline in foreign exchange reserves, which had dwindled to around $1.2 billion, barely enough to finance three weeks' worth of imports. The crisis was exacerbated by rising fiscal deficits, high inflation reaching over 13%, and a growing burden of external debt, which stood at approximately $72 billion. These factors culminated in a dire situation where India was on the brink of defaulting on its international obligations, leading the government to airlift its gold reserves to secure an emergency loan from the International Monetary Fund (IMF).

Preconditions

Several preconditions contributed to the economic crisis of 1991:

1.Excessive Regulation: The Indian economy was heavily regulated under the License Raj, which required businesses to obtain licenses for various operations, stifling innovation and efficiency. This resulted in a complex web of red tape that hampered industrial growth.