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Economic Reforms
Main Points to Highlight : Economic reforms in India were initiated in 1991. These were essential for country's growth, openness and liberalisation of Indian economy. These reforms have resulted in many socio-economic changes of great consequence. It is an ongoing process towards integration of Indian economy into world economy. As a result of these reforms, our growth rate has increased from 0.9 percent in 1991-92 to 66 percent in 1995-96 But there is still much left to be done. The road to growth and prosperity is long and full of bumps. Our infrastructure facilities are not of world standard yet and need massive domestic and foreign direct investments. The slow inflow of capital into India is an area of concern. In order to have sufficient foreign investment the reforms need to be speeded up. Genuine and timely reforms is another name of onward march and progress. To achieve economic growth economic reforms were initiated in 1991. Those reforms were essential for liberalisation of Indian economy. As a result there came socio-economic changes. Growth rate increased from 0.9% in 1991-92 to 66% in 1995-96 Quite understandable, that the growth rate will decide country's prosperity. Then, the infrastructure of the country were not of world standard To improve this, massive domestic and foreign direct investments is needed. The slow inflow of capital into India will fetch slow growth. And, this is an area of concern. This onward march for progress didn't stop. The official statistics indicates that the economy grew at a whopping 10.4% during October-December 2003.
Economic reforms in India began in 1993 when the country faced many harsh realities like fiscal and balance of payment deficits, constantly rising inflation. The crisis was of such a magnitude that the country had to pledge gold worth US $ 400 million abroad and depreciate the rupee by 25 percent in two instalments. The reforms were initiated in order to reduce inflation, fiscal deficit, poverty and to increase industrial growth, productivity, employment, increase exports and foreign exchange reserves. The chief measures taken under the reforms were allowing Foreign Direct Investment (FDI) and foreign institutional investors (FII) in the corporate and stock market segments, reduction in customs and excise duties, reduction in tax rates, and permission to Indian companies to tap international markets for their capital needs. A policy of PSUs disinvestment and opening up of banking and mutual fund industry to the private sector are other steps taken towards liberalisation of the economy.
The erstwhile licence-raj has been demolished, Indian rupee has been made convertible on the current account and in near future it may be made convertible on the capital account also. The Foreign Exchange Regulation Act (FERA) has been replaced with Foreign Exchange Management Act (FEMA). And all these have resulted in corporatisation of the society to a large extent and the beginning of a process of integration of Indian economy into global economy. These reforms have thrown open many new avenues and challenges simultaneously. Things have become more competitive, bigger and complex and only the finest will survive. Markets and investors have become more discerning and investors want good returns and the consumers value for their money spent. Now, the investors have greater choice and gone are the days when a few business houses dominated the corporate world.
India has been able to achieve reasonably good results of these reforms. The growth rate has gradually increased to 4.9 percent in 2013-14. The economic reform process has changed our economy into a developing one and today it is regarded as one the best economies in Asia. There have been better yields and profit margins in the corporate sector since then and the GDP growth has appreciably increased from 1.1 percent in 1990-91 to 6-7 percent in 1995-96. There has been growth in industrial production and inflation rate has come down to 6-7 percent from 17 percent. Reforms have also increased our foreign exchange reserves and market capitalisation of the companies has increased considerably. The foreign investment in the country through FDIs, FIIs, GDRs, Euro Issues etc. has been quite encouraging. But there is still much room for improvement and there cannot be any complacency. The road Lo growth and prosperity is long and full of bumps, barriers and blocks. The main objective of improving the quality of life and living standards of the people of the country is not yet in sight. The entry of multinational companies (MNCs) into consumer products sector on a big scale is also a source of anxiety. Instead they should invest massively in infrastructure sector and those in which huge capital and latest technology are involved.
Reforms and globalization of Indian economy has certainly started yielding results in terms of poverty alleviation to some extent. They have lent a helping hand in reducing poverty. According to the World Bank's latest report (1997) the economic reforms and liberalisation has done more to reduce poverty in India than government development programmes which have not benefited those they were meant for. According to the report entitled "India : Achievements and Challenges in Reducing Poverty" some of these government programmes have in fact largely missed their supported targets—the poor—and delivered the bulk of their benefits or subsidies to the politically or economically more advantaged. The economic growth in India has widened opportunities at the bottom as well as near the top of the society, says the report and this has increased the wages of landless rural workers since liberalisation. These reforms hold the promise of considerable improvement in the living standards of the country's 300 million poor avers the report. Inward looking industrialisation strategies of the past could not achieve the rate of poverty alleviation possible with alternative policies, says the Bank.
With the help of the World Bank, Mumbai is revamping its transportation systems, embarking on one of the most ambitious infrastructure projects in the world, resettling 100,000 residents, and building new roads and train tracks.
The Bank has praised the appreciable high growth rates in the past 5 years resulting from reforms, but the report cautions that there is much that remains to be done to sustain this growth. High fiscal deficits, tremendous infrastructure problems, inefficient financial systems and heavily subsidised segments are the problems facing the Indian Government, it says.
Reforms have opened new opportunities which should be exploited to the maximum. Reforms gradually reduce the role of the government. We need foreign investments on a large scale to improve our infrastructure facilities and accelerate growth but it is not flowing in the country to the extent and quantity we need. Perhaps it is because there are multiple authorities from whom sanctions are to he sought and, therefore, foreign investors shy away. During 1996 India could obtain only 2.8 percent of the total foreign investment. China tops the list with $ 52 billion or 18 percent of the total investment followed by Mexico, Indonesia, Malaysia, Thailand and Argentina. The capital inflow to developing countries is in the form of foreign direct investment, bank loan and bonds and portfolio investment. This slow inflow of the capital into India is also because of India's competitive edge in the context of global economy has not shown any improvement this year compared to 1996 and yet India has emerged as the world's third most preferred destination for F.D.I. In order to attract foreign capital into the country in the required quantity it is imperative that reforms are speeded up. According to the global competitiveness report of the World Economic Forum, India is still the least open economy behind only to Vietnam and Zimbabwe.
We have signed WTO accord but we need to open up and liberalise further to increase our share and gains in the world market. At present India's share is dismal 0.6 percent. We need a more open policy because by global standards, India is not competitive at all. It is high time that the maze of red tape and stifling regulations do not come in the way of the private sector initiatives. India needs to adopt such policies and programmes that attract foreign and domestic investments and encourage re-investment of profits. Genuine and timely reforms is another name of onward march, progress and development. but at the same time India has to watch its own interests and not to be swept away by the exhortations and preachings of the developed countries of the West. The euphoria of liberal economic reforms should not blind us to ground realities and national interests both in short and long terms. Global integration and globalisation are necessary and also inevitable but these should not lead to what is called local disintegration and social imbalances and disparities.
Talking of economic growth and economic development of the largest democratic country of the world will be a ground reality. Political rivals stake their claims for many good things they have achieved. But the people of the country take them with lot of criticism which is of course, a healthy sign of political awareness especially towards economic growth and development of the country which appears to be one of the most important issues of the 2004 General Lok Sabha election.
When the Bharat Uday Yatra entered Orissa through Naupada district, one of the poorest regions in the country, the Deputy Prime Minister L.K. Advani blamed the Congress for the country's backwardness in various fields. He pointed out that the Congress had failed to solve the problems facing the people living in the six lakh villages despite the party being in power for 48 years after independence. The fact is: what had so far been done for economic growth and development in these six lakh Indian villages? If "India Shining" slogan is a reality why then the people living in the villages have no access to education, drinking water, pucca roads, hospitals and water for irrigation purposes. Well, there is a dream—"the Vision 2020". Let it be a reality.
Bread and butter issues of development are remarkably absent from the election campaign of the Bhartiya Janata Party (BJP). 'Economic governance' over the past five years did not fetch much. So-called achievements in accelerating economic growth does not seem to be real achievements. If we draw a line of comparison between the two, the present is poorer what it was in as per record in 1992-98. Even after 68 years of independence, a greater emphasis is not being given to livelihood issues. 'Great power', 'developed economy' and 'superpower' will not keep number one issue aside.
It is obvious that growth and development are two different things. The experience of the past half century around the world has shown that while rapid economic growth is necessary for a steady improvement in the quality of life, growth by itself does not automatically lead to a better life for the majority.
What Indonesia did in 1990s is the most recent example. According to a study made by United Nation human development that what a society does with its drawings is as important as the generation of higher and higher incomes.
shared by Nisheeta Mirchandani
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