There is a plethora of initiatives that are guiding our economy for palatable reforms. Economic reforms, a term inclusive of both stabilization and structural adjustment; wherein stabilization refers to establishing external and internal poises by squashing domestic demand and also, refers to promotion of market-led growth. Reduction in public expenditure, devaluation of currency, changing monitoring policies, privatization, liberalization and globalization, etc. are indicative of ways to proceed towards economic reforms. It has brought a situation where an economy is rendered globally fit.
The 67-years of independence have seen many changes in the socio-economic landscape of world’s third largest economy. The external shock of 1991 set the stage for a fundamental mindset shift followed by major reforms after the year 1991. The undeniable paradigm shift came with the abolition of license raj which further eradicated public monopoly and opened several sectors of automatic approval of foreign direct investment. The reforms envisaged a new era of entrepreneurship and administration and thereby, making India one of the fastest growing computer and digital start-up hubs in the world.
Our past can be described as the manufacturer of our own industry rather than as a consumption engine that we have turned today. With an increase from 0.5 million telephone subscribers in 1991 to 1,035.18 million in 2016 marks the negative impacts of deindustrialization. Reforms led to the large-scale import of cell-phone handsets amounting to Rs.35,000 cr. in 2013-14 that could have been easily produced here had a policy of phased manufacture been adopted.
Two – wheeler like Bajaj Chetak and Lambretta accounted for more than half of the sale in the country. A bottle of soft drink, be it desi versions like Gold Spot or Thumbs Up, cost just Rs 4.50 and today we are guzzling colas, downloading music on our iPads and zipping around in our sedans. The cola market is worth about Rs 10,000 crore, up from just Rs 200 crore in 1991.
With rising income inequality, comes the great atrocities that have doubled the gap between the top and the bottom wage-earners in the past 25 years. Corporations created during the license raj still dominate many sectors which gave birth to a vast and unending bureaucracy, significant public expenditure and the development of a few large corporations that would dominate the private sector. Opening up of the economy with avoiding debt defaults was the main aim of reforms then, and now it has been coupled with bringing huge capital flow, building infrastructure, creating jobs, reducing poverty and creating prosperity for all.
At present, India focuses on fixing the architecture that is required for long-term positive change – making government accountable, clamping down on corruption, stimulating entrepreneurship and, hopefully, building out the much-needed infrastructure. These aspects can cure the problems caused due to improper implementation of the reforms that has resulted in a lack of employment & infrastructure and destruction of domestic industry. There is no doubt that India’s growth in this quarter-century is comparably higher, but it has not taken into account the declining economic equity which is producing low standards of lives as well. It would not be wrong to say that rapid growth will be difficult to sustain unless infrastructure investment is increased.
Increase in Non Performing Assets (NPAs) and inability to reduce fiscal deficit clearly mark the slacking aspects of the reforms and the inappropriate complex regime of taxation that deprived the economy from fully realizing the gains of reforms. Different pillars of the economy like banking, insurance and trade sector, etc. have improved towards integration of the market, but the pending bills of Goods and Services Tax, and enforcement of security interest and such other crucial bills forms the lacunae in the future of reforms.
Food grain production of India doubled to a record of 264 million tons in the fiscal year 2014. But in order to feed the large growing population, more than a quarter of which are below the poverty line, this production frontier should increase multifold. Make in India is one such initiative that will aid the domestic industry by neutralizing the impact of deindustrialization. Rather than tom-tomming about such schemes, government should take massive steps to effectuate implementation on a nationwide scale that will cure the setbacks to the trade unions.
On the plus side, opening of sectors such as railways and defense helped draw record foreign direct investment in 2015 during a period when investors were fleeing from emerging markets. India’s ranking has improved in the World Bank’s “Ease of Doing Business” index and it has eclipsed China in terms of world’s fastest growing economy. Moreover, according to a survey conducted by Ernst & Young, more than twice as many senior global executives opted for India as their favourite investment destination over the next three years, and thereby overtaking Asian giant China. These inflows have helped lift foreign exchange reserves from $ 5.4 Billion in 1991 to $ 360 Billion in 2016. Some sectors like broadcasting, telecom, retail, and information technology have leapfrogged in their development cycle, while others such as agriculture, roadways, manufacturing and electricity are yet to change much.
Undoubtedly, on the other side, the present reforms have impelled India to bear several costs like ecological degradation, strains in social fabric and individual distortions emanating from conspicuous disparities, etc. which are to be dealt accordingly.