Economic reforms
Main article: Economic liberalization in India
See also: Licence Raj
Major reforms in India's capital markets led to an influx of foreign portfolio investment. The major economic policies adopted by Rao include:
- Abolishing in 1992 the Controller of Capital Issues which decided the prices and number of shares that firms could issue.[4][24]
- Introducing the SEBI Act of 1992 and the Security Laws (Amendment) which gave SEBI the legal authority to register and regulate all security market intermediaries.[4][25]
- Opening up in 1992 of India's equity markets to investment by foreign institutional investors and permitting Indian firms to raise capital on international markets by issuing Global Depository Receipts (GDRs).[26]
- Starting in 1994 of the National Stock Exchange as a computer-based trading system which served as an instrument to leverage reforms of India's other stock exchanges. The NSE emerged as India's largest exchange by 1996.[27]
- Reducing tariffs from an average of 85 percent to 25 percent, and rolling back quantitative controls. (The rupee was made convertible on trade account.)[28]
- Encouraging foreign direct investment by increasing the maximum limit on share of foreign capital in joint ventures from 40 to 51 percent with 100 percent foreign equity permitted in priority sectors.[29]
- Streamlining procedures for FDI approvals, and in at least 35 industries, automatically approving projects within the limits for foreign participation.[4][30]
[edit] National security, foreign policy and crisis management
Rao energized the national nuclear security and ballistic missiles program, which ultimately resulted in the 1998 Pokhran nuclear tests. It is speculated that the tests were actually planned in 1995, during Rao's term in office,[31] and that they were dropped under American pressure when the US intelligence got the whiff of it.[32] Another view was that he purposefully leaked the information to gain time to develop and test thermonuclear device which was not yet ready.[33] He increased military spending, and set the Indian Army on course to fight the emerging threat of terrorism and insurgencies, as well as Pakistan and China's nuclear potentials. It was during his term that terrorism in the Indian state of Punjab was finally defeated.[34] Also scenarios of plane hijackings, which occurred during Rao's time ended without the government conceding the terrorists' demands.[35] He also directed negotiations to secure the release of Doraiswamy, an Indian Oil executive, from Kashmiri terrorists who kidnapped him,[36] and Liviu Radu, a Romanian diplomat posted in New Delhi in October 1991, who was kidnapped by Sikh terrorists.[37] Rao also handled the Indian response to the occupation of the Hazratbal holy shrine in Jammu and Kashmir by terrorists in October 1993.[38] He brought the occupation to an end without damage to the shrine. Similarly, he dealt with the kidnapping of some foreign tourists by a terrorist group called Al Faran in Kashmir in 1995 effectively. Although he could not secure the release of the hostages, his policies ensured that the terrorists demands were not conceded to, and that the action of the terrorists was condemned internationally, including by Pakistan.[39]Rao also made diplomatic overtures to Western Europe, the United States, and China.[40] He decided in 1992 to bring into the open India's relations with Israel, which had been kept covertly active since they were first established by Indira Gandhi in 1969[citation needed], and permitted Israel to open an embassy in New Delhi.[41] He ordered the intelligence community in 1992 to start a systematic drive to draw the international community's attention to alleged Pakistan's sponsorship of terrorism against India and not to be discouraged by US efforts to undermine the exercise.[42][43] Rao launched the Look East foreign policy, which brought India closer to ASEAN.[44] He decided to maintain a distance from the Dalai Lama in order to avoid aggravating Beijing's suspicions and concerns, and made successful overtures to Tehran. The 'cultivate Iran' policy was pushed through vigorously by him.[45] These policies paid rich dividends for India in March 1994, when Benazir Bhutto's efforts to have a resolution passed by the UN Human Rights Commission in Geneva on the human rights situation in Jammu and Kashmir failed, with opposition by China and Iran.[46]
Rao's crisis management after the 12 March, 1993 Bombay bombings was highly praised. He personally visited Bombay after the blasts and after seeing evidence of Pakistani involvement in the blasts, ordered the intelligence community to invite the intelligence agencies of the US, UK and other West European countries to send their counter-terrorism experts to Bombay to examine the facts for themselves.[47]
[edit] Challenges faced in office
[edit] Economic crisis and initiation of liberalization
Rao decided that India, which in 1991 was on the brink of bankruptcy,[48] would benefit from liberalizing its economy. He appointed an economist, Dr. Manmohan Singh, a former governor of the Reserve Bank of India, as Finance Minister to accomplish his goals.[2] This liberalization was criticized by many socialist nationalists at that time.[49][edit] Currency crisis
During the early 1990s, Rao's administration failed to arrest the 91 per cent fall in the value of the Indian Rupee from 17 to 32 to the US Dollar due to haphazard credit policies.[citation needed][edit] Rise in separatist movements
Ethnic militancy and separatism saw a rise in India spreading into the northeastern states of Assam,[50] Tripura[51] and Nagaland.[52] during Rao's tenure, based around Ethnic lines. The United Liberation Front of Asom was responsible for the increased militancy in Assam after Direct Peace talks had failed with the Central Government at Delhi [53].Meanwhile the Himalayan state of Jammu and Kashmir witnessed a separatist insurgency.Congress government claimed that training camps in Pakistan-administered Kashmir for militant groups, previously directed at evicting the Soviet army from Afghanistan, were now producing the same fighters who were infiltrating Kashmir.[54] He directly charged Pakistan with sheltering, arming and supplying infiltrators. During this time Hindu pilgrims and Sikh settlers were attacked, and hundreds of thousands of Kashmiri Pandits were forced to leave their homes in the Kashmir valley.[citation needed] Violence rocked and shut down parts of Kashmir, which was heavily dependent on tourism, and also struck major cities like Delhi and Mumbai.[55][56]
Rao's government introduced the Terrorist and Disruptive Activities (Prevention) Act (TADA),[57] India's first anti-terrorism legislation, and directed the Indian Army to eliminate the infiltrators.[58] Despite a heavy and largely successful Army campaign, the state descended into a security nightmare. Tourism and commerce were largely disrupted. Special police units were often accused of committing atrocities against the local population, Rape, kidnapping, torture and detention under false accusations.[59]
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