Rajiv Gandhis finance minister, V. P. Singh, uncovered compromising details about government and political corruption, to the consternation of Congress leaders. Transferred to the Defence ministry, Singh uncovered what became known as the Bofors scandal, involving tens of millions of dollars concerned alleged payoffs by the Swedish Bofors arms company through Italian businessman and Gandhi family associate Ottavio Quattrocchi, in return for Indian contracts. Upon the uncovering of the scandal, Singh was dismissed from office, and later from Congress membership. Rajiv Gandhi himself was later personally implicated in the scandal when the investigation was continued by Narasimhan Ram and Chitra Subramaniam of The Hindu newspaper. This shattered his image as an honest politician; he was posthumously cleared over this allegation in 2004.
Opposition parties united under Singh to form the Janata Dal coalition. In the 1989 election, the Congress suffered a major setback. With the support of Indian communists and the Bharatiya Janata Party, Singh and his Janata Dal formed a government. Rajiv Gandhi became the Leader of the Opposition, while remaining Congress president. While some believe that Rajiv and Congress leaders influenced the collapse of V. P. Singhs government in October 1990 by promising support to Chandra Shekhar, a highranking leader in the Janata Dal, sufficient internal contradictions existed, within the ruling coalition, especially over the controversial reservation issue, to cause a fall of government. Rajivs Congress offered outside support briefly to Chandra Sekhar, who became Prime Minister. They withdrew their support in 1991, and fresh elections were announced.In his book, Unknown Facets of Rajiv Gandhi, Jyoti Basu and Indrajit Gupta, released in November 2013, former CBI director Dr A P Mukherjee wrote that Rajiv Gandhi wanted commission paid by defence suppliers to be used exclusively for the purpose of meeting expenses of running the Congress party. Mukherjee said Gandhi explained his position in a meeting on 19 June 1989, during a meeting between the two at the Prime Ministers residence.