ABSTRACT
The need for reform was urgent. In January 1991, when foreign exchange reserves fell to a very low level and India's credit rating was downgraded, the country had been surprised and somewhat humiliated by the sudden prospect of defaulting on its international debt. 1 India at that time had foreign exchange reserves covering only two weeks' worth of imports, so a loan had to be raised in a hurry against the gold reserves of the Reserve Bank of India. The minority government of Chandra Shekhar, which had come into power only a few months previously, failed to do much to address this emergency. It was even unable to present the budget for 1991-92 at its usual time in February, because the Congress Party, which supported the minority government but was facing a particularly difficult election in the state of Tamil Nadu, did not wish to take responsibility for the higher taxes that had to be imposed. The presentation of the budget was therefore postponed, and in its place, a simple revenue statement was issued. Thus even at a time of severe economic crisis, short-term and partisan political considerations had obstructed economic reform.
