Before 1991, Russia was known as one of the biggest republic with the name Russian Soviet Federative Socialist Republic (RSFSR) in Soviet Union. However, in 1990-1991, Russia faced high inflation rate and the shortage of supply in all industries. At that time, the GDP of Russia also witnessed a decline of 17% and retail prices soared upto 140%. Moreover, Russian political conditions were in a bad shape. Consequently, the dissolution of the Soviet Union took place in 1991. In order to recover from the economic crises, Boris Yeltsin, the first President of Russia, implemented various measures for the economic growth of Russia, such as stabilisation policies and economic restructuring. These measures helped the Russian economy to focus on becoming market-based economy market economy from a centrally planned economy. Boris Yeltsin along with his advisors and an economist, Yegor Gaidar decided to implement measures for bringing up the Russian economy from inflation. The stabilisation measures adopted by them involved decreasing the government budget deficit, increasing government revenues, and controlling the supply of money by subsidizing credit provided to business persons. Moreover, Boris Yeltsin implemented policies for price control in the market, amended existing tax policies. He also took measures for increasing the privatisation in the country. Initially, the policies made by Boris Yeltsin failed to achieve its goals. The government then introduced monetary and fiscal policies, that helped in the implementation of the measures successfully and achievement of the goals and objectives. In the election of 1996, Boris Yeltsin was again elected as the President of Russia. However, after that, the economy began to witness another decline and Russia foreign exchange reserves decreased. By the year 1998, the currency showed a decline of 75%. As a result, people of Russia turned against Boris and the opposition towards him in the parliament was also high. In 2000, Vladimir Putin was elected as the President of Russia in 2000. He along with Mikhail Kasyanov, the Prime Minister of Russia implemented initiatives and legislative measures to transform the Russian economy in a market-based economy. As a result, in 2007, the Gross Domestic Product (GDP) of Russia rose above $1 trillion. The domestic energy industry of Russia majorly contributed to the fast growth of Russian economy. Oil exports were another factor that played a significant role in drastic change in economic conditions of Russia. As the major contribution in the GDP of Russia came from its fossil fuels and natural resources, the impact of global economic slowdown of 2007 was minimum. In addition, Russian trade with United States, which is the source of financial crisis of 2007, was very limited.

 

Questions

1. Why the measures taken by Boris failed after the second election that brought economic decline in Russia?

2. Discuss the main reasons that increased inflation leading to economic crisis in Russia?