• Nomura India Business Resumption Index a tracker of economic activity increased for sixth consecutive week to 91.3 for the week ending on July 4th from 86.3 showing that the business activity is rebounding very quickly after the second Covid wave.
  • Oil rose to 2 years high in mid-July with economic recovery. Brent was at $73.28 due to demand rise and OPEC supply cuts.
  • Retail inflation was 6 months high in May to 6.3% outside the RBI’s range of 4 + 2% on account of rising food and fuel prices. Wholesale price index was also on an upward trajectory. (It has bearing on RBI’s monetary policy’s accommodative stance)
  • Provisional estimates of national income released by the National Statistical Office (NSO) on May 31, 2021 placed India’s real GDP contraction at 7.3 per cent for 2020-21, with GDP growth in Q4 at 1.6 per cent y-o-y.

30 years of Economic Reforms:

1st July marks 30 years of economic reforms of India led in 1991 by Narasimha Rao and Manmohan Singh. From 1991 Indian economy has seen excellent growth and GDP has grown from $266 Billion in 1991 to over $3 Trillion in 2021.  Following are some interesting points:

  • Indian Economy before 1991 was marked by stress on import substitution, low foreign investment and license regulations and red tape commonly known as License Raj.
  • This resulted into a closed economy with very low GDP growth and stagflation. India also started having balance of payment problems from 1985.
  • By the end of 1990 India was in a serious economic crisis with government close to default and forex reserves of only 15 days (minimum safe level was at least 3 months) in June 1991.
  • At this time Narsimha Rao became prime minister of India (June 1991) with a minority government.
  • Rao gave the finance minister job and complete support to Manmohan Singh, a credible economist, instead of other congress leaders who were more likely to get the job like Pranab Mukharjee, who had been finance minister earlier in 1984.
  • New Industrial policy was formed to assist industrial growth with plans to pre-approve up to 51% foreign equity participation, allowing foreign companies to bring modern technologies, and dismantling of public sector monopolies except critical sectors.
  • On 1st July 1991, India devalued its rupee against major currencies against sharp reactions from oppositions only to be devalued again on 3rd to a total devaluation of 19%.
  • Finally on 24th July the historic budget was presented by Manmohan Singh which abolished the License Raj, pushed export promotions, removed import controls and laid foundation for vibrant capital markets.


RBI Bulletin (www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)


This material has been prepared by the personnel in Vora Corporate Finance which is Investment Banking arm of Vora Management Consultancy Private Limited and looks after Mergers & Acquisitions (M&A), Private Equity (PE), Fund Raising, Debt syndication and Valuations and is based out of Ahmedabad, Gujarat, India. Any views or opinions expressed herein are solely that of individual authors and may differ from view of Vora Management Consultancy Private Limited. This material is proprietary to Vora Management Consultancy Private Limited and is for your personal use only. Any distribution, copy, reprints or forward to others is strictly prohibited.

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