Remembering Manmohan Singh: How His Reforms Revolutionised India’s Personal Finance Landscape

Former Prime Minister Manmohan Singh passed away on December 26. The economist turned politician contributed significantly to changing India’s personal finance landscape. Singh served as India’s Prime Minister twice and once as the country’s Finance Minister. Singh also held significant positions at the Reserve Bank of India, the Planning Commission, and the International Monetary Fund (IMF). Singh is known for his economic liberalisation policies which were introduced in 1991.

These policies were instrumental in transforming India into one of the fastest-growing economies in the world. Here’s a look at some of the key personal finance-related changes introduced by Manmohan Singh across the many posts held by him throughout his tenure:

Manmohan Singh was appointed as the 15th RBI Governor under the then Finance Minister Pranab Mukherjee. He became the Governor of the Reserve Bank of India (RBI) on September 16, 1982. Singh’s tenure continued till January 14, 1985.

Setting Up Of Urban Banks Department

In his stint as the RBI Governor carried out significant reforms related to the banking sector. Singh also contributed to the setting up of the Urban Banks Department. The department was set up to oversee the regulation and supervision of primary (urban) cooperative banks.

Amendment Of Banking Laws Act

Singh also played a key role in amending the Banking Law Act in 1983. The increased the scope of activities which banks could undertake. The extended scope included nomination facilities for account holders and the strengthening of the powers of the Reserve Bank. The amendment also prohibited unincorporated bodies from accepting deposits from the public. Singh also stressed the need for banks to meet their demand for credit from their own resources. Singh also insisted on the integration of monetary and fiscal policies during his tenure as the RBI Governor.

Tax Reforms

In his term as the Finance Minister under the PV Narasimha Rao government, Singh introduced comprehensive tax reforms which sought to broaden the tax slabs and simplify the structure of taxation. One of the key decisions taken by Singh was the raising of the income tax exemption limit while decreasing the number of tax slabs from four to three. These moves were also aimed at increasing compliance from the taxpayer’s end. Singh also decreased the maximum marginal rate of personal income tax from 56% to 40% during his tenure.

Formation of SEBI

Singh also played a significant part in the formation of the market regulator Securities and Exchange Board of India (SEBI) in 1988. The formation of the SEBI helped in ensuring transparency and accountability for the Indian stock market.

Mutual Funds

Singh played an instrumental role in transforming India’s mutual fund industry. Singh opened the industry to private and public sector participation. In a speech delivered in 1991, during his tenure as Finance Minister, Singh highlighted the need for mutual funds in India and said that they were a suitable vehicle for many investors compared to direct ownership of shares.

“In regard to Mutual Funds, some progress towards evolving a competitive structure has been made in the last few years with encouraging results. For many investors, mutual funds are a more suitable investment vehicle than direct ownership of shares,” Singh said.

Seeing the potential for growth in the mutual fund industry, Singh allowed private sector companies to participate in the mutual fund industry, leading to the entry of many privately managed asset management companies.