It was sometime in 1990 that I began my stint, dealing with the balance of payments crisis, as it unfolded. The period was a politically tumultuous one, following the assassination of Rajiv Gandhi, coming on the back of the fall of the Chandrasekhar government and a caretaker government running the show, till Narasimha Rao took over.
At one stage, there was a suggestion to freeze non-resident Indian deposits with banks in India. When asked for my view, I suggested that such an option should not even be brought up in any discussion or documented. My concern was that if India lost the confidence of her diaspora, it would hurt our self-respect and pride across the globe.
At one stage, I was told that I might have to travel to Brunei one night secretly to obtain funds under instructions from the finance minister! It was a mission that I had to keep privy even from my family. I had packed my suitcase and told my wife Geetha that I was going to Mumbai for some urgent work. It was unwise and impractical and, fortunately, a little before midnight, the plan was called off.
There was a strong consensus among political leaders and professional circles that the country should not default on its debt obligations. The pledging of gold to the IMF was possible because of that consensus. In the three years of 1990-93, which spanned crisis and reform, we had seen three prime ministers, three governors, three financial secretaries and three chief economic advisors, I was the only constant. What was needed was political sagacity because everyone knew that, over the past 10 years, India’s old economic model had broken down. What was lacking was the political will and wisdom; the crisis was also an opportunity. PV Narasimha Rao had it, and the country was also fortunate that Dr Manmohan Singh had become the finance minister as he had been closely involved with the policies of the past – the good, the bad and the ugly.
Once the BoP crisis blew over, and after India embraced liberalisation, I offered prayers at the Balaji temple at Tirupati. Kulkarni, my colleague at the RBI, got his head tonsured as a traditional token of gratitude! It was only appropriate given that, outside of any central bank vault, Sri V