Former Prime Minister and Finance Minister Manmohan Singh served as the Governor of RBI from 1982 to 1985.
Former Prime Minister Dr. Manmohan Singh (PTI file photo)
New Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday paid tribute to Dr Manmohan Singh, acknowledging the former prime minister’s profound impact on India’s economic reforms.
“I am deeply saddened by the demise of Dr. Manmohan Singh, a visionary economist and former RBI Governor. His contribution as an architect of India’s economic reforms left an indelible mark. RBI mourns this great loss. Joining the nation,” Malhotra wrote in a post on X.
Dr. Manmohan Singh served as the Governor of RBI from 16 September 1982 to 14 January 1985. Several important policy decisions were taken during his tenure that shaped India’s economic landscape:
1982-83: Economy under strain
Macroeconomic Background: As a result of the severe drought, agricultural production suffered a severe blow and industrial production declined. Growth in M3 was higher due to reduction in the adverse effects of the decline in foreign assets. During the year, price levels were generally stable despite rapid monetary expansion.
Objectives and stance of monetary policy: To cope with slow deposit growth, failure of banks to meet their statutory reserves and demand for credit from productive sectors, the Reserve Bank normalized credit availability and increased credit flow to industrial activity. decided to provide a stimulus for
Key policy measures: Lending rates were reduced. The CRR was further reduced to 7.25 percent (April 9, 1982) and to 7.0 percent (June 11, 1982).
Important events: The Committee to Review the Functioning of the Financial System (Chairman: Prof. Sukhamoy Chakraborty) was set up in December 1982.
1983-84: Economic growth overshadowed by inflationary concerns
Macroeconomic Background: A boom in agricultural growth and higher industrial output contributed to strong economic growth in 1983-84. Overall, the BoP showed improvement, with liquidity growth at 17.0 percent considered uncomfortably high.
Objectives and stance of monetary policy: Reducing the expansionary effects of rapid growth in reserve money and at the same time supporting productive activities with increased credit flows.
Key policy measures: The CRR was increased to 8.0 percent (28 May 1983 to 30 July 1983) and again to 8.5 percent (27 August 1983). • Enhanced CRR of 10.0 percent (November 11, 1983). • CRR increased to 9.0 percent (February 4, 1984).
Important events: The Government of India terminated the three-year EFF borrowing arrangement with the IMF on 1 May 1984, about six months before its maturity.
1984-85: Monetary policy to achieve strong economic growth
Macroeconomic Background: Monetary expansion (M3) was higher than last year at 18.2 percent. Two factors were responsible: (i) a large increase in net foreign exchange assets of the banking sector; and (ii) increase in net bank credit to the government and commercial sector. On the fiscal side, there were large deficits in the revenue account due to increase in revenue expenditure for defence, subsidies and interest payments.
Objectives and stance of monetary policy: The primary stance was to contain overall liquidity and thereby curb inflationary expectations. At the same time, important public sector investment needs were to be met.
Key policy measures: The main instruments were reserve ratios, changes in refinance limits and selective credit controls. • SLR increased to 36.0 percent (July 28 to September 1, 1984). • Release of part of seized cash (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 1 June 1985. Finance Minister VP Singh presided over the event.