Manmohan Singh’s iconic 1991 budget speech that changed the country forever – ‘India is now wide awake…'

Manmohan Singh's 1991 budget speech as the Finance Minister introduced groundbreaking economic reforms amid a severe crisis, marking a transition to a liberalised economy. His bold declarations and strategic policy changes redefined India's global standing and economic trajectory.

Gulam Jeelani
Updated27 Dec 2024, 12:33 PM IST
Manmohan Singh’s iconic 1991 budget speech: Manmohan Singh, then India’s finance minister, in a photo from October 24, 1991.
Manmohan Singh’s iconic 1991 budget speech: Manmohan Singh, then India’s finance minister, in a photo from October 24, 1991. (HT Archive)

Manmohan Singh, who passed away on Thursday at 92, was Prime Minister for two terms in the Congress-led UPA government from 2004 to 2014. Singh also served as Finance Minister in the government of Prime Minister PV Narasimha Rao from 1991 to 1996, when he was instrumental in implementing sweeping economic reforms in the country.

It was on July 24, 1991, that the then Finance Minister Manmohan Singh gave a historic speech that eventually opened India’s doors to global economy. In the 1991 Budget , Singh introduced economic reforms that liberalised the country and undertook measures to boost domestic growth at a time when the country was battling a severe balance of payments crisis.

‘Just 15 days worth forex reserves’

Singh famously reminded Parliament that the country was left with just 15 days worth of forex reserves. "The current level of foreign exchange reserves, in the range of 2500 crore, would suffice to finance imports for a mere fortnight," he said.

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Singh asserted that there was no time to lose. "Neither the government nor the economy can live beyond its means year after year," he said before announcing measures to liberalise the policy regime for direct foreign investment into India.

Singh announced a radical policy that would end the crippling license raj system in the country in his famed speech. “It is essential to increase the degree of competition between firms in the domestic market so that there are adequate incentives for raising productivity, improving efficiency and reducing costs,” he said.

In his death, Singh leaves behind a legacy of achievements by contributing to ushering in economic reforms in the country. A renowned economist, Singh's role includes devaluing the rupee, reducing import tariffs, and privatising state-owned enterprises.

"In the pursuit of this objective, we have announced important changes in industrial policy which will bring about a significant measure of deregulation in the domestic sector, consistent with our social objectives and the binding constraints on the balance of payments," Singh told Parliament in what went on to be known as one of the iconic speeches in post-Independence India.

End of licence raj 

Singh told the House that time has come to expose Indian industry to competition from abroad in a phased manner.

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"As a first step in this direction, the Government has introduced changes in import-export policy, aimed at a reduction of import licensing, vigorous export promotion and optimal import compression. The exchange rate adjustments on 1st and 3rd July 1991, and the enlargement and liberalisation of the replenishment licence system constitute the two major initial steps in the direction of trade policy reform," he said.

Quoting Victor Hugo

Singh quoted French romantic novelist, Victor Hugo in his speech, saying "no power on earth can stop an idea whose time has come”. Singh concluded the 1 hour and 35-minute speech by quoting the iconic lines from poet Girija Kumar Mathur's composition "Hum Honge Kamyaab".

“I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now wide awake. We shall prevail. We shall overcome,” he said.

Defending the Budget

Singh faced a trial-by-fire to ensure widespread acceptance of his path-breaking 1991 Union budget that saw the nation rise from its darkest financial crises.

Singh, the newly-appointed finance minister in the PV Narasimha Rao-led government, did it with great elan – from facing journalists at a post-budget press conference to irate Congress leaders unable to digest the wide-ranging reforms at the parliamentary party meeting.

Singh's historic reforms not only rescued India from near bankruptcy but also redefined its trajectory as a rising global power.

Congress leader Jairam Ramesh's book "To the Brink and Back: India's 1991 Story" recounts the fast-paced changes after Rao became prime minister in June 1991.

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"The finance minister explained his budget – calling it 'a budget with a human face'. He painstakingly defended the proposals to increase fertiliser, petrol and LPG prices," reads the book. Ramesh was an aide to Rao during his initial months in office.

Only two MPs – Mani Shankar Aiyar and Nathuram Mirdha – backed Singh's budget wholeheartedly. Bowing to pressure from the party, Singh had agreed to lower the 40 per cent increase in fertiliser prices to 30 per cent but had left the hike in LPG and petrol prices untouched.

The Cabinet Committee on Political Affairs met twice on August 4 and 5, 1991, to decide on the statement Singh would make in the Lok Sabha on August 6.

"The statement dropped the idea of a rollback, which had been demanded over the past few days but now spoke of protecting the interests of small and marginal farmers," Ramesh said in his book.

"Both sides had won. The party had forced a rethink but the fundamentals of what the government wanted -- the decontrol of prices of fertilisers other than urea and an increase in urea prices – had been preserved," he recounted.

No power on earth can stop an idea whose time has come.

"This was political economy at its constructive best – a textbook example of how the government and the party can collaborate to create a win-win situation for both," Ramesh added in the book.

(With PTI inputs)

Key Takeaways
  • Manmohan Singh's 1991 budget was a response to a severe balance of payments crisis, introducing critical economic reforms.
  • The speech emphasized liberalizing the economy, reducing the license raj, and promoting foreign investment.
  • Singh's reforms not only rescued India from financial turmoil but also set the stage for its rise as a global economic power.

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