A STUDY OF POORLY DESIGNED ECONOMIC REFORMS IN INDIA

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The economic growth attempted with a closed environment until the 1990s failed to mitigate poverty and raise per capita income to dignified level resulted in a new model of development whereby the environment was expected to be liberalized. In a way, the economy was given a free hand to work in the right direction. The liberalization of trade and investment was the plank of economic growth in 1991. Since the scope to increase investment and trade which was not tried earlier was realized and indeed it resulted in appreciable growth in GDP which mitigated poverty and increases employment. But as the growth rate indeed was appreciable till 2008-09 but the economy could not withstand the wrath of fault in the globalization which remains attached with it and hence no emerging economy had to pull back from the globalization before reaping the full benefits as India has done in the middle of ascending path. The country is once back to the rule of protectionism because it had not cared about the rules and tenets of globalization. Since the globalization is not one-sided, the other side was also needed to be nurtured well. It was in 1997, the rules for capital account convertibility were written down and over the years these have been ignored. In the most simple words, the dual deficit is not good for the overall health of the economy and hence to get rid of them as fast as possible should be nicety of the economy. But over the years the economy has been given lip services which could not prove good for sustainable growth and hence the results are before us. Since 1991 the data of fiscal deficit and current account deficit is presented to analyze as to what has caused the growth rate to shrink which was never the case. The defect lies in the repeated current account deficit which is coming up every year but artificially contained with the capital inflow and in some critical situation, its impact on the exchange rate was also allowed to fall on it. The net result is that currency is still overvalued when seen from the angle of the Real Effective Exchange rate. Despite the inflation difference across the currencies, Indian currency is allowed to be kept overvalued so that import does not become inflationary too much. Otherwise, the country has succeeded in clearing all exports it wished where it was enjoying competitiveness and uniqueness. The broad exportable goods are presented as under.