Manmohan Singh’s contributions as the architect of India’s economic reforms have left an indelible mark: RBI Governor

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Manmohan Singh’s contributions as the architect of India’s economic reforms have left an indelible mark, RBI new Governor Sanjay Malhotra said on Friday 

“I am deeply saddened on the passing away of former Prime Minister, Dr Manmohan Singh, a visionary economist and former RBI Governor. His contributions as the architect of India’s economic reforms have left an indelible mark. RBI joins the nation in mourning this huge,” Malhotra said in a post on X.

Dr Manmohan Singh took the reins of RBI from September 16, 1982 and held office till January 14, 1985. Here are some of the major policy decisions during that time.

1982-83: Economy Under Strain

Macroeconomic Backdrop: Severe drought conditions resulted in a serious setback to agricultural output and a decline in industrial production. Growth in M3 was higher due to a reduction in the negative impact of decline in foreign assets. uring the year, the price level was generally stable despite rapid monetary expansion.

Objectives and stance of monetary policy: To counter sluggishness in deposit growth, the failure of banks to meet their statutory reserves and the demand for credit from productive sectors, the Reserve Bank decided to restore normalcy in credit availability and provide a stimulus for industrial activity by increasing the flow of credit.

Salient policy measures: Lending rates lowered. CRR reduced to 7.25 per cent (April 9, 1982) and further to 7.0 per cent (June 11, 1982).

Important events: The committee to review the working of the monetary system (Chairman: Prof Sukhamoy Chakravarty) was set up in December 1982.

1983-84: Economic Growth Overshadowed by Inflationary Concerns

Macroeconomic Backdrop: A sharp pick-up in agricultural growth and higher industrial production helped in strong economic growth in 1983–84. hile overall, the BoP showed improvement, the growth of liquidity at 17.0 per cent was considered to be uncomfortably high.

Objectives and stance of monetary policy: To reduce the expansionary impact of rapid growth in reserve money and at the same time support productive activities with increased credit flow.

Salient policy measures: CRR raised to 8.0 per cent (May 28, 1983– July 30, 1983) and again to 8.5 per cent (August 27, 1983). • Incremental CRR of 10.0 per cent (November 11, 1983). • CRR increased to 9.0 per cent (February 4, 1984).

Important events: Government of India terminated from May 1, 1984, the three-year EFF borrowing arrangement with the IMF, i.e., about six months before it was to conclude.

1984–85: Monetary Policy Attuned to Achieving Strong Economic Growth

Macroeconomic Backdrop: Monetary expansion (M3 ) at 18.2 per cent was higher than in the previous year. The two factors responsible were: (i) the large increase in net foreign exchange assets of the banking sector; and (ii) increases in net bank credit to Government and commercial sector. n the fiscal side, large deficits on revenue account emerged due to a spurt in revenue expenditure for defence, subsidies and interest payments.

Objectives and stance of monetary policy: The basic stance was to contain overall liquidity and thus curb inflationary expectations. At the same time, the needs of vital public sector investments had to be met.

Salient policy measures: Main instruments were reserve ratios, changes in refinance limits and selective credit controls. • SLR raised to 36.0 per cent (July 28– September 1, 1984). • Release of a part of impounded cash balances (October 27 and December 1, 1984)

Important events: The Reserve Bank completed 50 years of service to the nation on March 31, 1985. he golden jubilee celebrations were inaugurated on June 1, 1985, by the Prime Minister Rajiv Gandhi. The function was presided over by the Finance Minister V.P. Singh.