She attempted to overcome the economic crisis with US$5 billion loans, by means of the SDR (Special Drawing Rights), from the IMF Extended Facility Fund - the greatest amount the IMF had ever lent to member countries. The Extended Facility Fund offers conditionalities, thereby various liberalization measures were introduced in industrial and trade policies. Unfortunately, such liberalization conflicted with the self-reliance spirit, which is part of Indian economic philosophy. Those measures, together with the bitter experiences in the latter half of the 1960s, provoked strong resistance in the country. Against this background, the basic framework of the controlled economy system remained. Thus, this period can be characterized by liberalization of the economy while a system of controlled economy was maintained.
Whilst the manufacturing sector achieved a relative growth rate of about 7% throughout the 1980s in the process of economic liberalization, the trade balance was destined to stay in the red, in exchange for the import-substitution industrialization. The trade-deficit rate of GNP during this period was as high as mid 1960s levels (See Figure 1-1). The current- account deficits in the first half of the 1980s were financed mainly by aids from abroad, whereas in the second half of the year, the proportion of borrowing from overseas Indians' deposits and foreign commercial banks gradually increased. The aid from foreign countries and borrowings for external trade made the debt service ratio surge, and, in the mid 1980s, exceed 25%, which is the critical level. Moreover, overseas Indians' (NRI) deposits largely tend to be hot money, so the funds were recalled on a large scale at the time of the 1991 economic crisis, making the situation even worse. With the growing current-account deficit, A macroeconomic environment was gradually formed, just like that of Thailand immediately before the 1997 monetary crisis.
With the defeat of the Congress in the 1987 general election, politics also has gone from one unstable coalition government to another.
