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Manmohan Singh, the former prime minister and finance minister, served as the RBI governor between 1982 and 1985
Former PM Dr Manmohan Singh (PTI File Image)
Sanjay Malhotra, the new Governor of the Reserve Bank of India (RBI), paid tribute to Dr. Manmohan Singh on Friday, acknowledging the former Prime Minister’s profound influence on India’s economic reforms.
“I am deeply saddened by the passing of 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. The RBI joins the nation in mourning this great loss,” Malhotra wrote in a post on X.
Dr. Manmohan Singh served as the Governor of the RBI from September 16, 1982, to January 14, 1985. During his tenure, several key policy decisions were made that shaped India’s economic landscape:
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. Prime Minister Rajiv Gandhi inaugurated the golden jubilee celebrations on June 1, 1985. The function was presided over by the Finance Minister VP Singh.
