Late night on June 20, Cabinet Secretary, Finance Secretary, and the Chief Economic Adviser met the yet to be sworn Prime Minister at 12, Willingdon Crescent. That night the resolve came through clearly. In the eventful month between June 24 and July 24, 1991, critical decisions were made and the outcome was LPG. P V Narasimha Rao was most decisive in the crisis situation and quietly persuasive in political management. In short, liberalisation was aimed at putting an end to the license raj system, decreasing government interference, liberalising and easing the economy. This subsequently opened the markets and ended the public sector monopoly. With this, the Nehru legacy of socialism began fading. Flash forward to 2016 and our economy has changed significantly.
With the global scenario taking on a new shape, it becomes imperative to analyse the position of India growth so that it emerges as a global key player. Post liberalisation, poverty has come down, the standard of living has shot up, financial markets have developed, and the country is open to capital flows and investments. This has provided an opportunity to all. The geographical spread of opportunities and the increase in migration have contributed to nation-building. India has remained the second fastest growing economy in the world. Especially between 2005 and 2008, the economy reached its 9% target annually. Though unemployment rates have come down only marginally, the sectoral composition of labour has witnessed a notable change. The agriculture sector, which is considered India’s backbone, now employs less than 50% of the labour force, while industrial and service sectors have surged ahead.
Though only a small fraction of the Indian population invest in share markets, the ups and downs in Sensex reveal the economic and political scenario of the country. Amidst fluctuations owing to internal scams and rupee devaluation, the Sensex has increased steadily over the two and half decades. Since the ruling party came to power the index portrays a healthier economy. The new laws to be enacted next year such as the GST will ease the process of doing business in India which will attract more investors and entrepreneurs.
The economy has become resilient too. India was able to pass through the global economic crisis without many economic disruptions both during the Asian crisis in the late 1990s and the Global Recession in 2008. There is a global presence of Indian manufacturers and especially the service sector. India’s soft power, be it via cricket or Bollywood, has helped us to emerge as a key global player.
25 years later it is important to understand that reforms are means, not ends. The objective of every reform is the well-being of people. For this markets and governments should not become substitutes rather should be complements to each other. If governments perform badly, it cannot be replaced by the market and there are certain things that only markets can do. Efficient markets need efficient governments
