The full story of why the reforms finally began to happen in 1991, under the minority government of Prime Minister Rao, awaits research: we are still too close to it. But I have some candidates that have a bearing on my speculation as to the prospects of India not reversing the existing reforms and of her continuing to undertake further reforms.

First, 1991 saw India perilously close to declaring bankruptcy as the reserves shrank rapidly towards nothing. The macroeconomic crisis, developing steadily as the internal budget deficit got out of hand and reliance on external borrowing became unprecedented, was finally at hand. As many have observed for South America, a macroeconomic crisis, where you rush for the lifeline that the Bretton Woods institutions provides, clears your head as well as the prospect of a hanging. The notion that India, during what I have called Phase II here, had now come to a turning point where it was more readily manifest than ever that her economic policies could not be allowed to continue unchanged. And so the changes, attempted sporadically in the past, would finally begin in earnest.

But then add also the fact that no Bretton Woods support would have been forthcoming without a dose of conditionality pointing in the same direction. The spread of reforms worldwide, before India was getting to them, meant that the IMF–World Bank conditionality could no longer be dismissed as ideological; it had been legitimated as sensible prescription which only reflected what we had all learned in three decades of experience.

But I suspect that it also reflected a sense in the leadership of the Prime Minister and his chosen Finance Minister who would spearhead the reforms that they had here a chance to make history, putting the economy finally on to a path that was bound to work and bring them glory. An India which had played a major role in world affairs in the 1950s was now a marginal player on that very stage, a reflection of her having shot herself in the foot. The historical parallel was with Gorbachev contemplating the decline of the Soviet Union and seeking to seize the moment with perestroika: the English Sovietologist has recorded how Gorbachev and Scheverdnadze had discussed that things simply could not go on as they had in the Soviet Union, and that they had to seize the moment.

India’s elite, including the bureaucracy, also came to realise that there was a growing dissonance between India’s traditional claim to respect and attention and her shrinking ability to command them as her economic policies and failure became more widely known and a subject of derision. I suspect that the worst psychological state to be in is to have a superiority complex and an inferior status!