It would not be wrong to call July 24, 1991, India’s day of economic independence. Thirty years ago, with the budget presented on July 24, the foundation was laid for an ‘open economy’ in India.
In India’s closed economy, government was deciding everything. The government decided how many goods would be produced, how many people would work to make them and what the cost would be. This system was known as ‘License Permit Rule’.
In contrast, in a free economy, it is necessary to free up private companies. Encourage private enterprises. Reduce government investment. And promote open or free markets. Thirty years ago, India announced a number of economic reform plans to move towards a free economy. Which was a key part of the July 24, 1991 budget.
Special aspects of the budget
Announcement to increase competition among companies in the domestic market.
End of licensing rule, companies free from various restrictions.
The budget introduced changes to the export and import policy. Aimed at simplifying import licensing and boosting exports.
The budget welcomed foreign investment. And said that foreign direct investment would create employment opportunities.
The budget announced a tax rebate under Section 80HHC of the Income Tax Act for software exports.
This budget was a great event in the history of modern India. The credit for this goes to the pair of then Prime Minister Narasimha Rao and his Finance Minister Dr Manmohan Singh.
Presenting the budget, Dr. Singh quoted French thinker Victor Hugo in Parliament as saying, “No power on earth can stop the idea that the time has come.”
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PV Narasimha Rao was a former Prime Minister of India
Dr. Singh meant that India’s emergence as a major world power and an economic power was an idea whose time had come and no one could stop it. Manmohan Singh’s words of confidence were one thing, but the decision to bring about economic reforms was a compulsion of India.
India was going through the biggest economic crisis in history at that time. Surya Prakash, former chairman of Prasar Bharati, India’s largest government broadcaster, was a senior journalist at the Indian Express at the time.
“I think it was a compulsion. If we accept this challenge. We can move towards change. So the crisis of 1991 was a similar crisis.
Secondly, the country’s good fortune was that we got a senior leader like Narasimha Rao as the then Prime Minister. The steps he took with great foresight changed the state and direction of the country forever.