25 Years of Economic reform :-An overview

​Nothing on Earth can stop an idea whose time has come 

quoted the then finance minister Manmohan Singh unleashing the big bang reform of 1991.

Indeed the chaos over economic downturn due to fiscal deficit, inflation, unemployment etc had reached to its most egregious situation. Thus, reform leading to Liberalisation, Privatisations and Globalisation was an inevitable consequence.
The 25 years of liberalisation had brought the structural changes in Indian economy. It had brought far reaching changes in economics, social, political and Cultural sphere of India. Thought it’s repercussions over shortcomings and ill-effects of liberalisation too has raised questions.
Economy
India has changed its philosophy of economic development from 1991. Earlier it was State which was responsible of development now it was left to individual and market forces.
In many ways it did help India in achieving its development goals . As percentage of people below poverty line reduced from 46 in 1991 to 21 in 2011. Average life expectancy has increased from 58 years to 67. Rural wage increased from Rs 46/day to Rs 276/day.
Service sector emerged as the biggest beneficiar. It grew in leap and bound. Today it contributes around 57% share in GDP at factor cost (current price).
All this resulted in decline of absolute number of poor for the very first time in India going by Lakdawal committee or Tendulkar Committee.
Purchasing Power Parity (PPP) gives a comprehensible ideas on the standard of living and the cost of living in a particular country. When per capita income of Indian is calculated in term of PPP, the standard of living has improved for sure. However the cost of living has risen too. In 1991, per capita PPP was $1,173. In 2014, it rose nearly five times to $5,701. Nevertheless when compared with developed countries India’s standard of living as well as cost of living is quite low.
However, along with rise in income the social – minimum cost of living has increased too, due to increased pollution, industrialisation etc. As per one of Kerala study, the health cost of rich has increased by 250% while those of poor increased by 750% in post reform period.
India’s switching to market economy has ghastly marginalised a section of people. As excess to market need resources at disposal.
India’s growth in agriculture has almostly remained stagnant at around 2%. Its contribution in GDP has decreased from 29% to 15% in 2014. Though it still employs 50 percent of labour.
Contribution of manufacturing sector did not see significant rise. Its contribution remained stagnant at around 15 percent in 25 yrs of Reform.
Hence, overall it hardly had addressed the unemployment issue significantly. As decline in unemployment rate is only marginal from 4.3 in 1991 to 3.6 in 2014. India unemployment rate grew from 6.8 percent in 2001 to 9.6 percent in 2011, according to census data.
Jobless Growth

• At the time of reforms being introduced, majority of work force were :- illiterate, lack of access to any health service, inequality in ownership of land. Such economic and social underpinnings have dragged majority of people from getting advantages of Reform era.
• Such factors proved critical for development in post reform era in country like China, south korea etc.
• Capital intensive nature of modern manufacturing.
• The lack of skill in majority of people forced them to get employed in informal sector. Such jobs have often been described as vulnerable by World Bank.
• Artificial intelligence, computation and other modern technology too are replacing human as a low cost alternative.
• Due to long restrictive labour laws, Companies hiers workers on contract basis. Data from Annual Survey of Industries shows that 13.5 percent of workers in manufacturing sector were engaged through contract in 1991-92 which increased to 34.7 percent by 2011-12.
• The new economy which is more digital is slowly but definitely changing our prospect. JAM (Jandhan, Aadhar, Mobile based subsidy) Trinity and overall emphasis on second generation digital revolution which will spread across economic spectrum from agriculture, rural, healthcare, education etc will create a new avenue of job.
• The government on its part seems to have grasped this change. Hence new thrust areas – such as Digital India, Skill India, Start up India and Make in India – all focus on creating an ecosystem that will generate job.

Structural Issues

• While reforms addressed entry, they couldn’t catalyse exit. The Economic survey of India 2015-16 argues that entry without exit has probably met its limit. In almost every sector of economy, lack of exit is creating huge economic, political and fiscal cost.
• India can’t possibly hope to leapfrog decades of destitution with an unhealthy and untrained labour force. The casualty work both ways :- greater growth leads to improved health and education, but further growth is not possible without reinvesting a substantial portion of the gains in human capital of future generation.
• A strong market economy must effectively rest on an effective State. India on midst of large demographic dividend, which if not tapped could see this great civilization staring at the middle income trap with prolonged human costs.

Social

• Post reform period has seen huge inflow of money. Those at the advantageous position has used it both as tool and means to further amass huge wealth. It resulted in growing inequality as Global Wealth Data book 2014 shows top 1 percent has household Wealth equal to 49 percent in 2014, up from 37 percent in 2001. While those of 10 percent is equal to 74 percent in 2014, an up from 66 percent in 2001.
• Historical ideas of caste and class that justify inequality have been topped up in neo-liberal times with the belief that greed is good. This has resulted in a particularly uncaring middle class and exile of poor from their conscience and their consciousness.
• The reform era has given birth to whole range of aspirational class who look at their entrepreneurship and profession as means to social mobility.
• Respect to talent irrespective of caste and social gathering on same platform due to economic endeavor has to some  extent reduced caste based social stigma.
• Political Scientist Devesh Kapur had documented the rise of Dalit entrepreneurs in India. Dalit historically looked to State and more recently political mobilization as a tool for rectifying Cultural wrongs. While analysing data on a thousand Dalit entrepreneurs, the study brings into focus an entirely new avenue of mobilization where economy play an unparallel role.
• Women employed in organised sector got almostly doubled in the 25 years of Reform. It has empowered women to assert their right and transcend the patriarchal underpinnings.

Political

• Economic growth while preserving the sanctity of non-violent transitions has made election richer and labyrinthine.
• Unbridled flow of money has increased political and corporate nexus. Hence more use of black money in election. Rampant corruption in favour of corporate. Huge write off in budget etc.
• This has resulted in crony capitalism. Such incidence has further fueled inequality.
• Though gradual increase in literacy has made people more aware of their right. It has made political party answerable to people.

Culture

• Globalisation to some extent is a move towards homogenization of culture. Generally glorification of western culture  erodes regional culture.
• MacDonaldism and culture of denim-Jeans and T-shirt have seen an unprecedented level of acceptance leaving behind Indian traditional custom.
• Though Indian soft power too has grown through spread yoga, bollywood etc.