Narasimha Rao was catapulted to the prime ministership in 1991 - a time when the country's foreign exchange (forex) reserves had been depleted to about $1 billion - just about enough to pay for around a week's import requirements and gold had to be secretly pledged with the Bank of England to meet international debt commitments.

In that period, if a businessman wanted to import machinery, he had to deposit the full rupee value of the machinery with a bank before being able to import. If an entrepreneur wanted to set up a scooter-manufacturing unit, it was the government, which dictated how many scooters he could manufacture. Meanwhile, the person who wanted to buy a Bajaj scooter - the only road-worthy scooter available those days - had to wait for over five years after receiving the prized allotment letter.

The GDP grew by about 2.5 to 3.5 percent every year, dismissed derisively by economists as the Hindu rate of growth.

Today, forex reserve stands at over $120 billion dollars and is still rising, the gold has been redeemed long since, scooters are available off-the-shelf and India is looking at a GDP growth of 8 to 10 per cent.

Some call it choice, some call it compulsion but whatever it may be, the credit for bringing about a paradigm shift in the way the economy now runs goes to Rao.

Rao began his stint as prime minister with a master stroke. He appointed the honest, apolitical and internationally respected Manmohan Singh as his finance minister and gave him a free hand to restructure the economy. He also appointed the then relatively unknown P Chidambaram as commerce minister who was to bring in significant changes in trade policies.

The pledging of gold to a large extent hurt national pride and alerted the nation to the precarious state of the economy was. It became clear that the extreme solution of going to the IMF was unavoidable.

Singh's high credibility in the international aid community became an important factor in speeding up the aid packages not only from the IMF, but also the World Bank and the Asian Development Bank.

The areas which the reforms process chose to address were opening up to foreign investment, reforming capital markets, deregulating domestic business and reforming the trade regime. The government intended to reduce the fiscal deficit, privatise the public sector and increase investment in infrastructure though little progress was made on these three fronts.

In M arch 1992, the government abolished the post of the 'controller of capital issues', which controlled the number of shares and the price at which a company could issue its share to the public. The SEBI Act of 1992 and the Security Laws (Amendment) gave SEBI the legal authority to register and regulate all security market intermediaries.

Later, in November 1992, the country's equity markets were opened up to investment by foreign institutional investors and Indian firms were permitted to raise capital from international markets by issuing Global Depository Receipts.

The National Stock Exchange was set up and became operational in 1994. This introduced a computer-based trading system and served as an instrument to bring about reforms in other stock exchanges.

By 1994, the economy was back on the rails and the strain on the forex reserve position eased. At this stage, capital account convertibility in the current account was introduced. Trade reforms like the introduction of exim scrips and changes in the regulation of foreign direct investments (FDI) were also ushered in to open India to foreign trade.

Tariffs were reduced from an average of 85 per cent to 25 per cent and quantitative controls were rolled back. Increasing the maximum shares of foreign capital in joint ventures from 40 to 51 per cent with 100 per cent equity permitted in priority sectors encouraged FDI.

Procedures for FDI approvals were streamlined and in a least 35 industries, approvals for projects within the limits for foreign participation were automatically approved.

As a result of all these changes, total foreign investment grew from a minuscule $158 million in 1991-92 to $4.7 billion in 1995-96.

Industrial policy reforms began in 1992. A new Industrial Policy Resolution was passed that year and in terms of the policy industrial licensing was slashed, leaving only 14 industries subject to licensing. Industrial regulation was rationalised. Any entrepreneur with the will and money could set up a plant for manufacturing scooters.

This article, so far, seems to suggest that the years 1991 to 1996 were a golden era, which is far from reality. While the ideas for reforms were good and well intentioned, the pace of reforms was not satisfactory. The main thrust of reforms was to do away from the old socialistic policies and the political fall out well as opposition from industrial circles was natural.

During the first two years of his tenure as prime minister, Rao had the political clout to back Singh to the hit. However, the demolition of the Babri Masjid and the ongoing political financial scandals weakened him considerably in the final three years. Rao started taking decisions keeping an eye on the next elections. Decisions on reforms issue became slow and almost came to a standstill causing many a heart burn between Rao and Singh.

The Congress lost the next elections and Rao lost his parliamentary seat. He had to spend the remaining years of his life in semi retirement.

The important thing to note here is that though Rao was in a political limbo, his ideas were kept alive. All the subsequent governments, some with diverse ideologies have initiated reforms in one way or the other and reforms have come to stay.

That is the legacy of Narasimha Rao.