Reforms and Economic Transformation in India: A Stocktaking

Artha Vijnana: Journal of The Gokhale Institute of Politics and Economics, 2007

2020

Economic model of India had not changed after the country established its Independence. Even though economic reform that started in 1991 had not changed that model either. The GDP decreased in 2019, the level of poverty is high, and India became semi-agrarian country. Current government of Narendra Modi has been making reforms but the results are less successive for the last months of 2019 and those rates are decelerating. Economic history of China and other “Eastern tigers” shows how these countries achieved industrial growth during short period of time. What it means that the economic policy should be changed in the first place, and only then the GDP per capita will grow. Consequently, India will finally become a post-industrial society.

2014

Introduction:-After Independence, the managers of the Indian economy found that the world has been sharply divided into two blocks: the one led by the capitalist economies and other led by the communist economies, primarily the then USSR. There was a cold war between these two blocs. Less developed economies had no option than to join either of the two and invite the ire of the opposite bloc. Especially those economies that were under the British Empire and won freedom during 1940's faced a difficult choice. India chose to keep a safe distance from both the blocks by inventing the idea of a mixed economy. In doing so, India invited as much favor as suspicion from both the blocks. Some economists hold the opinion that the Indian economy was pro-capitalism in its core that wore the façade of a socialistic economy. The state-managed economic endeavors facilitated capital formation in the private sector, often at the cost of the public sector and resources, preparing for a smooth transition to open capitalism in future when the conditions were ripe for such a transition. has given a vivid picture of this possibility. Nevertheless, the officially proclaimed management policy of the national economy of India was modeled on the socialistic pattern, primarily that of the USSR. It is relevant to note that since the 1970's, the growth rate of the USSR economy had slowed down substantially. Extensive economic development, based on vast inputs of materials and labor, was no longer possible; yet the productivity of Soviet assets remained low compared with other major industrialized countries. Product quality needed improvement. Soviet leaders faced a fundamental dilemma: the strong central controls of the increasingly conservative bureaucracy that had traditionally guided economic development had failed to respond to the complex demands of industry of a highly developed, modern economy . Soon after independence, India adopted the path of planned development where the public sector was to play a dominant role in fostering growth at both the central and state levels. The First Five-Year Plan, which was launched in 1950-51, was based on the Harrod-Domar model and primarily concentrated on raising the level of investment in irrigation, power and other infrastructure for accelerating growth. The development strategy was changed radically in 1956 with the initiation of the Nehru-Mahalanobis model of industrial development that emphasized the development of heavy industry under the public sector. Domestic industry was protected from foreign competition through high tariff walls, exchange-rate management, controls and licences. This strategy of import substitution and heavy-industry promotion has been criticized for having created a non-competitive, inefficient, capital-intensive and high-cost industrial structure. It is further argued that this policy discriminated against labour-intensive tradable agriculture and resulted in unwarranted export pessimism because of excessive concern about selfsufficiency. The criticism, however, must be balanced against the fact that during this period India built a large infrastructure not only in heavy and machine goods industries, but also in the areas of power, irrigation, credit, higher education, scientific research and training .The mid-1960s and early 1970s were characterized by serious economic problems. First, because of wars with neighbours, large resources were diverted towards defence, resulting in a sharp decline in public investment that adversely affected the growth of the economy. Second, the foreign exchange situation forced India to devalue its currency

India was a latecomer to economic reforms, embarking on the process in earnest only in 1991, in the wake of an exceptionally severe balance of payments crisis. The need for a policy shift had become evident much earlier, as many countries in east Asia achieved high growth and poverty reduction through policies which emphasized greater export orientation and encouragement of the private sector. India took some steps in this direction in the 1980s, but it was not until 1991 that the government signaled a systemic shift to a more open economy with greater reliance upon market forces, a larger role for the private sector including foreign investment, and a restructuring of the role of government. India’s economic performance in the post-reforms period has many positive features. The average growth rate in the ten year period from 1992-93 to 2001-02 was around 6.0 percent, as shown in Table 1, which puts India among the fastest growing developing countries in the 1990s. This growth record is only slightly better than the annual average of 5.7 percent in the 1980s, but it can be argued that the 1980s growth was unsustainable, fuelled by a buildup of external debt which culminated in the crisis of 1991. In sharp contrast, growth in the 1990s was accompanied by remarkable external stability despite the east Asian crisis. In addition, the annual average growth rate for the periods 2002-03 to 2011-12 is 7.97 percent. Poverty also declined significantly in the post-reform period, and at a faster rate than in the 1980s and 1990s, 2000s decades according to studies.

Diss. University of …, 2006

Zenith International Journal of Business Economics & Management Research, Vol.4(9),, 2014

Since the beginning of economic reforms in 1991, the Indian economy had followed a growth pattern, which is different from the historical development of the economy as well as different from the developed economies. The Indian economy has undergone structural changes over time with the expected decline in the share of agriculture in the GDP from 55.1 per cent in 1950-51 to 13.9 per cent in 2012-13. It is important sector of the Indian economy from the point of view of employment generation and rural development. The rural areas are still the homes of more than 70 percent Indians and approximately 52 percent working population depend upon it. Though we are service driven economy but the dependence on agriculture still continues. The experiences of developed countries show that transfer of labour force from agriculture to non-agriculture, but this is not true with India. The present paper analyzes the structural change in post-reform era and the imbalance in the growth-employment pattern in Indian economy. The study also suggests some measures that how to reduce this imbalance by agricultural development.

IJAR - Indian Journal of Applied Research, 2016

Economic reforms have an important impact on Indian economy. There is many changes in Indian economy, after adopted the policy of LPG. Developed nations show their interest in Indian market and try to invest in Indian economy to achieve profit and for extend their market. Therefore Indian economy comes on track which loose in decade of 1980's. Liberalization, Privatization and Globalization came in behaviour after the economic reforms. Foreign investors started the investment in many sectors. Many of the Public enterprise's power transfer to private sector. Indian economy opened for all foreign investors and MNC's. This paper discuss the impact of economy reforms on India.

During the early years of Independence, the Indian Policy makers adopted a planned economy approach to development and advocated state run industries with just a few areas open to the private sector. But after three decades, the Policy makers in the early 1980s started realizing the drawbacks of the old inward looking, import substitution strategy of economic development. By mid-1980s, it was clear that a drastic shift in policy was needed to speed up the rate of growth. India launched its massive economic reforms in 1991 under the pressure of economic crises and the government converted the prevailing economic crisis into an opportunity to launch massive economic reforms. After economic reforms significant changes have taken place in the economy. Exports have increased because of qualitative improvement of the products and imports have increased because of liberal import policies. But BOT/BOP deficits instead of narrowing down have further increased because of greater import intensity of exports.

ISAS Special Report, 2020

Written by scholars at the Institute of South Asian Studies, this Special Report covers various aspects of India’s latest round of the economic reform process thus far, analysing the pros and cons of these initiatives. The papers reflect on the economic significance of the policies and their political undertones as well as the regulatory and administrative challenges that need to be overcome to make the reforms meaningful and sustainable.

Economic Reform Processes in South Asia, 2012