“Everyone was surprised to see me…”: the phone call in 1991 that put Manmohan Singh on the brink of history

It was a humble June night in 1991 when a phone call changed the course of India’s economic history. Manmohan Singh, the then chairman of the University Grants Commission, had just returned from a conference in the Netherlands and was settling in for the night.

His brother-in-law answered the phone. PC Alexander, a close aide of Prime Minister PV Narasimha Rao, was on the phone with an unexpected summons for Singh.

By June 21, Singh was in his UGC office, unaware of what awaited him. The directive came: Go home, get ready and head to Rashtrapati Bhavan for the swearing-in ceremony. Singh, an economist with no political experience, was at a loss. “Everyone was surprised to see me as a member of the new team that was preparing to take oath. My portfolio was allotted later, but Narasimha Rao ji immediately told me that I would become finance minister.”

The economy that Singh inherited was in free fall. Foreign exchange reserves fell to cover no more than two weeks of imports. Inflation was in the double digits, and global banks closed their doors to India. The challenge was enormous, but within days, Singh, with Rao’s unwavering support, launched bold reforms that reversed decades of economic stagnation.

On July 24, Singh presented a path-breaking Budget. The Licensing Raj – a system that stifled industries with excessive regulations – was abolished. Industrial licenses were canceled in most sectors, foreign direct investment was welcomed in 34 industries, and state monopolies began to dissolve. The rupee was devalued to boost exports, trade policy was liberalized, and fiscal discipline was imposed.

But these reforms did not pass without opposition. Among the harshest critics was the Bombay Club, a group of industrialists who feared liberalization would expose Indian companies to overwhelming foreign competition. This informal alliance sought continued government protection through tariffs, subsidies, and other guarantees. They claimed that the Indian industry is not ready to take on the global giants on equal footing.

Singh and Rao remained resilient. The reforms went ahead despite resistance, proving that the Bombay Club’s fears were unfounded. Liberalization has unleashed India’s entrepreneurial energy, transforming a controlled, low-growth economy into one of the world’s fastest-growing major economies.

In his maiden Budget speech, Singh had warned that “the price situation, which is of immediate concern to the broad masses of our people, poses a serious problem as inflation has reached a double-digit level.” But by stabilizing the economy and initiating structural reforms, he and Rao laid the foundation for the India we see today – a global economic powerhouse.