According to Business Standard reports, C Rangarajan, former RBI deputy governor and Economic Advisory Council chairman, revealed that the 1991 reforms represented a fundamental break with India's economic past. As RBI deputy governor from 1982-1991, Rangarajan oversaw the two-step rupee devaluation on July 1 and 3, 1991, ahead of Manmohan Singh's Union Budget presentation on July 24. The crisis was triggered by excessive borrowing during the 1980s, with the Sukhamoy Chakravarty Committee Report in 1985 calling for limits on net RBI credit to the government, but fiscal deficits continued to widen. The minor oil shock of 1990 when Iraq invaded Kuwait proved the final catalyst, with India facing a $6 billion short-term debt that needed daily rollover and $10 billion in outstanding NRI deposits prone to capital flight. As Rangarajan explained, "The decision on devaluation is usually announced by the government. In 1991, it was done differently. The RBI was daily announcing the value of the rupee those days. At the meeting on devaluation, it was decided that this time the RBI would announce the decision as part of its daily announcement."
As reported by Business Standard, the Rao government implemented critical measures within the first two weeks of July 1991, including exchange rate adjustment, abolition of all export subsidies, and shipment of 15% of RBI's gold reserves as collateral. According to Rangarajan's recent interview, the two-step devaluation was crucial despite opposition, with the second stage necessary to maintain credibility and avoid sending the wrong message to international investors. The reforms eliminated the multitude of permits and licenses that dominated the Indian economy, modified the state's role, and abandoned the old import-substitution policy. "The reforms made a break with the past. They did away with the multitude of permits and licences that dominated the Indian economy. The role of the state was modified and finally the new strategy of development did away with the old import-substitution policy."
According to Business Standard reports, both Nayyar and Rangarajan identified significant gaps in India's structural reforms that led to long-term de-industrialisation. Nayyar criticised the absence of industrial policy as an industrial policy itself, noting that "India's share in world manufacturing value-added dropped from 1.3% in 1990 to 3% in 2025, while China's share rose from 0.8% to 28%." Rangarajan emphasised that "No country in history has industrialised without an industrial policy, including the United Kingdom, the United States, and the now successful Asian economies like South Korea, Taiwan, China, and Vietnam." He highlighted that India's R&D expenditure as a share of GDP declined from 0.66% in 1990 to 0.60% by 2024, while China's increased to 2.4% by 2024. As Nayyar explained, "Industrialisation is not about passive insertion into the world economy. It is about strategic integration. Our trade liberalisation did not foster industrialisation because it was not combined with an effective industrial policy."
As reported by Business Standard, both economists warned that India has wasted its demographic dividend opportunity, with poor learning outcomes in schools and politicised universities potentially leading to a middle-income trap. Nayyar emphasised that employment remains India's biggest challenge, with manufacturing as the potential source of quality jobs, while the informal services sector and construction currently provide low-wage employment. Rangarajan noted that "Viksit Bharat (developed India) is not feasible if the education system is declining, with poor learning outcomes and excessive centralisation of admissions processes." Both economists called for strategic industrial policy requiring coordination of exchange rate, monetary, technology, industrial finance, and R&D policies, along with improved education quality. Rangarajan emphasised that "Reforms are a continuous phenomenon. As circumstances change, we need to introduce new measures to take care of new challenges. There are still issues to be addressed such as small banks versus large banks, universal banking, continuous authorisation, consolidation, role of foreign banks, operations of Indian banks overseas and government ownership."
