In 1990-91, India was on the verge of bankruptcy; Indian bullion had to be airlifted to the vaults of the Bank of England as collateral against our borrowing. At that stage, it took enormous courage on the part of then prime minister P V Narasimha Rao and his finance minister Dr Manmohan Singh to discard the policies of the licence-quota-permit Raj and go in for economic liberalisation.
There was vigorous opposition to this about-turn in the economic policy pursued during the previous four decades. People argued that throwing open our economy would bring the East India Company back, would take away jobs from our workers, would not provide a level playing field for our industrialists and would impoverish India.
Despite such powerful opposition, Narasimha Rao and Manmohan Singh went ahead and proved them wrong. It was the economic liberalisation policy initiated in 1991 that provided India with the necessary foreign exchange reserve in 1998 and enabled her to withstand the international pressures Delhi was subjected to following the Shakti tests. The economic liberalisation policy coincided with the end of the cold war, the collapse of communism as an ideology and the initiation of the globalisation process.
The end of the Cold War and bipolarity pushed nuclear weapons into the background; economic power became the primary currency. The new trade regime under the World Trade Organisation came into being. It became clear that state controls and centralised planning were hampering the growth of wealth and job creation.
The changes in our economic policy resulted in our growth rate rising to over six percent. The disastrous results anticipated by vested interests with respect of liberalisation did not take place. Poverty level came down, though not to the desired levels. Indian entrepreneurship demonstrated that it could be competitive in the world market. Our expertise in information technology started making an impact globally.
One could say, in retrospect, that economic liberalisation, with its implication of joining the globalisation process, is the reversal of the Non-Aligned strategy (not to be confused with the Non-Aligned Movement of which India was never a whole-hearted supporter) of keeping away from blocs aligned against each other.
Once the Cold War ended, bipolarity faded away and the international system became globalised. The right place for India, representing one sixth of humanity, was in the global balance of power as a major actor.
Photograph: Shoppers throng the stores at a mall in Mumbai. Photograph: Jewella C Miranda
Also read: Celebrating the Indian dream
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