CHANGES EMERGED IN INDIA AFTER
25 YEARS OF REFORMS
Mithilesh Kumar Sinha | Professor In Economics, Department Of Economics, Nagaland University,
Lumami-798627, E-mail: [email protected]
PROLOGUE
T
his year India is commemorating the 25th
year of the 1991 true economic reforms.
It was in July of 1991 that the first phase of
reforms kick-started under the then Prime
Minister P V Narasimha Rao at a time when Dr.
Manmohan Singh was his government's Finance
Minister. These reforms led to the opening of
India's doors to the outside world to bring in the
much-needed growth in the economy with an
aim to reduce poverty, increase exports,
allowing the private sector to have a larger role
and in particular a restructuring of the role of
government.
India in 1991 was a poor, misgoverned country,
derided as a bottomless pit for foreign aid. Today
it is called a potential economic superpower,
backed for UN Security Council membership by
the US and set to overtake China to become a
fastest growing country in the world. Now India
has become a miracle economy; social, and
welfare spending is at record levels; and Indian
businesses not only hold their own position but
have become multinational themselves (Aiyar:
2011). Real economic growth in the first three
decades of Independence was a miserly 3.5 per
cent a year which shows that the Indian economy
reverted to the old "Hindu rate of growth”.
India's GDP growth was around 3-4 percent till
liberalization of the economy and financial
sector reforms were introduced in the early
nineties. The Indian economy witnessed dismal
scenario with a chaotic fiscal deficit, a difficult
balance of payments situation, spiraling prices,
Economic Challenger// ISSN 0975-1351/ Oct.-Dec. 2016
a fall in industrial production and bearish stock
market. Till 1990, both Pakistan and Sri Lanka
performed better than India. Pakistan's average
annual economic growth rate between 1965 and
1980 was 5.8 percent compared with India's 3.2
per cent. The ratio of exports to GDP for Pakistan
in 1990 was 15.5 percent against India's 7.1 per
cent.
Thus, India's economic opening up in 1991
created the basis for India's re-integration with
not just the global economy but also with its
wider Asian neighborhood. While India's
political freedom is 60 years old, its economic
freedom dates to 1991 when the government
abandoned the planned economy in favor of the
free market. Since then it has become one of the
fastest growing economies in the world (7%-9%
annually with moderate inflation except 2008)
compared to the earlier 'Hindu rate of growth'
(3.5%. or less).
As India approaches the 25th year of that
epochal moment, the objective of the paper is to
examine through the lens of key indicators what
difference took place in India after 25 years of
reforms period, what changes India witnessed
and what challenges emerged to be addressed.
Keeping this in view, the paper is divided into
three sections. Section I explores changes and
differences that India registered in 25 years of
reforms. Section II investigates what challenges
emerged during the reforms period, and the final
section contains some recommendations to
cope up the challenges, emerged during two
decades of reforms with concluding remarks.
Changes emerged in India
3