Thirty years of economic reforms of 1991-II

Thirty years of economic reforms of 1991 is remembered on major way to look ahead for next decade, or more. 

The following are some of very interesting analysis of what went right and wrong in the last thirty years while implementing various reforms in Indian economy.

If there is any big takeaway from India’s post-Independence history, it lies in the effects of the 1991 reforms. Those reforms essentially consisted of the government retreating from large parts of the economic space of the country. The result: A doubling of GDP growth and the lifting of over 200 million people out of poverty in the two decades that followed. This was the effect of individual and corporate enterprise being unleashed under relatively less controlled regulatory conditions.

To counter the liquidity problem, the government ushered in policy reforms aimed at speeding up the pace of economic growth. The reforms began with the devaluation of the rupee on July 1, 1991, followed by a second round of transfer of a total of 46.91 tonnes of gold from the reserve assets of the RBI in Mumbai to the Bank of England, which enabled India to borrow $400 million to solve its liquidity problems.

The demographic dividend will go into reverse gear. Government programmes in earlier years aimed at population reduction but will now switch to promoting larger families. The old slogan “Do ya teen bas” will be replaced by “Sirf do ya teen, bas?”

The character of higher education and the governance and standards of the professions in India are likely the principal reasons why the social and political role of the Indian middle class has been so wanting.

Another problem is that most of our public discussion of reforms focuses on what the central government should do, but water, electricity distribution and health are critical areas which are all in the state sector. If you check what politicians are saying in state elections you will see that it does not reflect an awareness of the need for reforms.

Looking at the recent discussions on agricultural marketing reforms, the best course of action now may be to leave these measures to each state to decide whether they want these legislations or not. That will set the stage for experimental economics and farmers themselves will be able to see the best possible solution for different crops and conditions.

Wealth will thus migrate from developed countries to India. Of course, a critical requirement to achieve this goal is rapid re-skilling of our workforce and reforms in our education system to make our children and youth futureready. Specifically, we must expeditiously build world-class universities and research centres and also upgrade existing institutions to serve India’s 21st century needs.

India proved resistant to the sweeping transformation that would boost many East Asian economies. Too often, Indian politicians packaged measures designed to aid an individual business or industry as economic reform, when the measures in fact retard competition and growth. Pro-business is not the same as pro-capitalist, and the distinction continues to elude us.