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Submitted by Subramanian on
I would like to draw your attention to this passage: “Another point to stress is that the reforms that were implemented especially in India were “home grown”, with policy makers at the time having a blue print of what was needed to stabilize the economy and rejuvenate growth—in other words, the Washington Consensus or some version of it was NOT imposed on these countries. It was very much part of their own plans.” Ms. Kochhar has the facts wrong. In India’s case the so-called liberalization in 1991 was not “home grown.” India was nearly bankrupt in 1991 was close to default. The foreign reserve was about $1.5 billion just barely enough to service 3 weeks of imports and was matter of weeks before India would have defaulted on its sovereign debt for the first time. Let us revisit what had happened: In April 1991, India sold 20 tons of gold to the Union Bank of Switzerland and raised about $200 million and sold 47 tons to the Bank of England for about $400 million. Then there was this IMF. India received ~$200 million and ~ $600 million in 1991. By the end of 1991, India reached a standby arrangement with IMF that promised $2.3 billion over next two years months to build its foreign reserves. There is no need to expand on how IMF dispenses money in such a situation. India was forced to undertake institutional reforms and liberalization of the financial sectors. Devaluation of currency took place. Rupee went from $1 – 14 in 1990 to $1-40 in 1991. There are 100s of articles have been written on how India was forced to liberalize its fiscal and trade policies. Looking back, it was a blessing. But the poor suffered from double-digit inflation during 1991–1996. So coming back your statement that “reforms…..it was NOT imposed on these countries.” is absolutely incorrect. “It was very much part of their own plans.” again absolutely incorrect. India had no choice and I wouldn't say defaulting was their plan. Your central thesis of the post is wrong.