1991 provided ample opportunities to build on the strong foundations in economic, political and social sphere, laid during the pre - reform period of planned development. ii. development experience : post - reform period triggers of reforms the policy reforms in the 1980s provided impetus for high growth and enhanced competitiveness but the growth process turned unsustainable. it manifested in the growing macroeconomic imbalances over the decade in the form of high fiscal deficit, high levels of current account deficit, and increasing levels of short term external debt, besides a repressive and weakened financial system. the immediate provocation for the crisis in 1991 was also a combination of external events that generated liquidity problems on the external front. the gulf crisis of 1991 not only affected india ’ s oil imports due to soaring oil prices but also eroded export markets in west asia, and caused a setback to inward remittances and tourist earnings. the deterioration in exports to eastern europe, with the break - up of erstwhile ussr, accentuated the crisis. around the same time, india ’ s credit rating was lowered, which restricted its access to commercial borrowings and there was unwillingness on the part of normal banking channels to renew short - term credit to indian banks abroad. exceptional financing measures became inevitable, and the overall deficit in 1990 - 91 was financed almost equally by recourse to imf and drawdown of reserves. the severity of the balance of payments crisis in the early 1990s could be gauged from the fact that india ’ s foreign currency assets depleted rapidly from us $ 3. 1 billion in august 1990 to us $ 975 million on july 12, 1991. i would now narrate the story of our exciting journey from the agony of 1991 to relative comfort in 2007, and conclude by mentioning prospects and challenges ahead of us. reform measures during the crisis period, a conscious decision was taken to honor all debt obligations without seeking rescheduling and several steps, including some unconventional ones, like pledging gold with international institutions, were resorted to tide over the crisis. the immediate steps undertaken included, among others, tightening of non - essential imports and availing credit from the imf and other multilateral and bilateral donors. a macroeconomic structural and stabilization programme encompassing trade, industry, foreign investment, exchange rate, public finance and the financial sector was put in place creating an environment conducive for the expansion of trade and investment. it was recognized that trade policies, exchange rate policies and industrial policies

the regional offices. management of public debt the aggregate stock of public debt of the centre and states as a percentage of gdp is high, currently at around seventy five per cent. there are, however, several unique features of management of public debt in india, which are noteworthy. first, states have no direct exposure to external debt. second, almost the whole of public debt is local currency denominated and held almost wholly by residents. third, public debt, of both centre and states is actively and prudently managed by the reserve bank of india ensuring comfort to financial markets without any undue volatility. fourth, the government securities market has developed significantly in recent years in terms of turnover, depth and participants, and significant further improvements are underway. fifth, contractual savings supplement marketable debt in financing deficits. finally, direct monetary financing of primary issues of debt has been discontinued since april 2006. hence, the high stock of public debt relative to gdp has not so far been a matter of concern as far as stability is concerned, while it is recognised that long term sustainability would call for a gradual reduction to prudent levels. vi. external sector reforms benefiting from a calibrated and sequenced strategy of liberalisation, india ’ s external sector has become more resilient. exports have been growing at an average rate of around 25 per cent during the last three years, while imports have grown by around 35 per cent during the same period. the current account remained in surplus during 2001 - 02 to 2003 - 04, before turning into a modest deficit since then. there was a significant strengthening in the capital account resulting in continued accretion to the foreign exchange reserves, which was around us $ 228. 8 billion as on august 31, 2007. as could be seen from the table 2, there has been considerable improvement in liquidity and sustainability indicators of external debt. the exchange rate of rupee became market determined from march 1, 1993 and by august 1994 india became current account convertible by accepting article viii of the articles of agreement of the imf. there was simultaneously a significant rationalization of the tariff structure in a gradual manner providing opportunity for domestic industry to equip itself to face global competition. for instance, the customs duty on non - agricultural products has come down from 150 per cent in 1991 - 92 to 10. 0 per cent in 2007 - 08. a qualitative change was brought about in the legal framework for liberalization by the enactment of the foreign exchange