Abstract
This paper aims to assess the economic reforms in India undertaken during the 1990s. India has gone through the first decade of her reform process. Hence, an assessment of what has been achieved so far and what remains on the reform agenda is in order. Reforms in the industrial, trade, and financial sectors, among others, have been wide and deep. As a consequence, they have contributed more meaningfully in attaining higher rates of growth. A decade of opening of the economy has produced new dynamism, most dramatically in the information technology sector, but in others as well. The new technologies (especially information technology and biotechnology) give new opportunities for economic and social development. It is necessary to move swiftly to complete many of the reforms, which are now underway. Examples of such continuing reforms are the reduction in protection levels, continuing reforms in banking sector, product de-reservation for the small-scale industry, decontrol of prices, such as petroleum, reform of the power sector and so on. Among other things, sustaining higher rates of economic growth would require a more vigorous pursuit of economic reforms at both the federal and state levels. Significant reduction of fiscal deficit is the first order of business. Unless substantial fiscal consolidation is achieved, in our view, continued fiscal deficits pose India's greatest risk to future destabilization. Other critical reforms include, labor laws, exit policy, privatisation of state-owned enterprises, further opening-up of the economy to trade and foreign direct investment. In addition, there is a vast amount of economic reform that can be carried out to improve conditions in rural India, especially in the Gangetic valley. The reforms implemented so far have helped India attain 6 plus percent growth, however, should India be able to implement the remaining reforms and re-orient governmental spending away from inessential expenditures towards high priority areas of health and education and infrastructure development, then it is very likely to attain and sustain even higher rates of economic growth.
Highlights
Crisis and Response: In response to a fiscal and balance of payments crisis in1991, India launched a program of economic policy reforms
Four different governments were in office during the 1990s - the Congress government which initiated the reforms in 1991, the United Front coalition (1996-98) which continued the process, the BJP led coalition which took office in March 1998 and again the BJP led National Democratic Alliance (NDA) in October 1999 till date
Reforms in the Trade and Foreign Investment Regimes: The set of policies regarding the external sector including devaluation of the rupee, making the rupee convertible on current account, liberalization of the trade regime, allowing imports of gold, encouraging foreign direct investment (FDI) and technology inflows, opening the capital market to portfolio investment by foreign institutional investors (FIIs), and permitting domestic companies to access foreign capital markets have brought about a dramatic turnaround and steady progress in the
Summary
Crisis and Response: In response to a fiscal and balance of payments crisis in1991, India launched a program of economic policy reforms. Four different governments were in office during the 1990s - the Congress government which initiated the reforms in 1991, the United Front coalition (1996-98) which continued the process, the BJP led coalition which took office in March 1998 and again the BJP led National Democratic Alliance (NDA) in October 1999 till date. The balance of payments came under severe strain from one liquidity crisis experienced in mid-January 1991 and another in late June 1991 On both occasions, the foreign exchange reserves dropped significantly and the government had to resort to emergency measures, such as using its stocks of gold to obtain foreign exchange, utilization of special facilities of the IMF, and emergency bilateral assistance from Japan and Germany among others. The government embarked upon a program of more fundamental economic policy reforms
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