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India’s 1991 Crisis and the RBI Governor’s Role


From UPSC perspective, the following things are important :

Prelims level: BOP Crisis, LPG Reforms

Mains level: Read the attached story

S. Venkitaramanan, former Governor of the RBI

Central Idea

  • S. Venkitaramanan, former Governor of the Reserve Bank of India (RBI), passed away, leaving behind a legacy of significant contributions.
  • His tenure is marked by crucial interventions during India’s economic crises and a commitment to open dialogue and innovative policies.

Navigating the Balance of Payments Crisis

  • Economic Turbulence in 1990: India faced a severe balance of payments crisis due to reduced remittances and increased oil prices.
  • Critical Measures: Under Venkitaramanan’s leadership, the RBI took bold steps, including pledging gold reserves, to avert a default on international payments.
  • Impact of Gold Pledging: This move, though criticized domestically, was crucial in maintaining India’s international credibility and financial stability.

Role in Economic Reforms

  • Import Compression Strategy: Venkitaramanan initiated a program of import compression, significantly reducing the current account deficit.
  • Foundation for Future Reforms: These measures laid the groundwork for the economic reforms introduced by the Narasimha Rao government and Dr. Manmohan Singh.

Challenges and Controversies

  • The Harshad Mehta Scam: Venkitaramanan’s tenure was marred by the securities scandal involving Harshad Mehta, overshadowing his earlier achievements.
  • Public Perception: Despite his significant contributions, the public memory often overlooks his role in steering India through economic turmoil.

Remarkable Openness and Inclusivity

  • Engagement with Diverse Opinions: Venkitaramanan was known for his openness to different viewpoints, engaging with economists and critics alike.
  • Innovative Approach to Policy Making: His willingness to consider varied perspectives contributed to more inclusive and effective economic policies.

Legacy in the RBI and Beyond

  • Establishment of the Development Research Group: Venkitaramanan’s vision led to the creation of this group, aiming to foster interaction between the RBI and independent economists.
  • Influence on Current Economic Policies: His belief in relying on India’s intellectual resources continues to influence the RBI’s approach, though challenges like inflation management persist.


  • Enduring Impact: S. Venkitaramanan’s tenure as RBI Governor was marked by courageous decisions and a commitment to intellectual openness.
  • Remembering His Contributions: While his term had its challenges, his role in safeguarding India’s economy and fostering a culture of dialogue and research within the RBI remains a significant part of his legacy.
  • Inspiration for Future Leaders: His approach to economic policy and management continues to serve as an inspiration for current and future leaders in the field.

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