Perspective of Economic Reforms in India

 The economic liberalization in India refers to the ongoing economic reforms in India since July 1991. The first small attempt to liberalize the economy in 1966 was reversed very soon in 1967. The second major attempt was in 1985 by the then Prime Minister Rajiv Gandhi and the process also came to a halt in 1987.  In 1991, after India faced a balance of payments crisis, it had to pledge 20 tonnes of gold to Union Bank of Switzerland and 47 tonnes to Bank of England as part of a bailout deal with the International Monetary Fund (IMF). The IMF required India to undertake a series of structural economic reforms. As a result of this requirement, the Indian Government started breakthrough reforms, although they did not implement many of the reforms the IMF wanted. The new neo-liberal policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalization has since remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies. Thus, the reforms of 1991 carried out by minority governments proved sustainable and fruitful.

The fruits of liberalization reached their peak in 2006-07, when India recorded its highest GDP growth rate of 9.6% at 2004-05 prices. With this, India became the second fastest growing major economy in the world, next only to China.

The table below gives the GDP growth in the various economic sectors per annum during the pre-reform and the post reform periods.

Sectors	Growth of GDP at (2004-05) Prices
	1990-91 over 1950-51	2011-12 over 1990-91
1.  agriculture,forestry & fishing	2.56	2.99
1.1 agriculture	2.67	3.04
1.2 forestry & logging	0.65	1.56
1.3 fishing	4.34	4.39
2.  mining & quarrying	5.68	4.06
Primary Sectors	2.75	3.12
3.  manufacturing	5.37	6.89
3.1 registered	6.35	7.70
3.2 unregistered	4.17	5.31
4.  electricity, gas & water supply	9.22	6.38
5.  construction	4.86	7.23
Secondary Sectors	5.37	6.95
6.  trade, hotels & restaurant	5.05	8.23
6.1 trade	5.03	8.19
6.2 hotels & restaurants	5.14	8.74
7. transport,storage & communication	5.79	10.39
7.1 railways	4.14	5.56
7.2 transport by other means	6.40	8.02
7.3 storage	4.45	4.52
7.4 communication	6.48	19.57
8. financing,ins.,real estate & bus servs	4.85	9.01
8.1 banking & insurance	7.65	10.92
8.2 real est, O'ship of dwellings	4.09	7.62
9.  community, social & pers. servs	4.73	6.46
9.1 public administration & defence	6.14	6.14
9.2 other services	3.79	6.71
Service Sectors	4.96	8.30
10. GDP of All Sectors	4.01	6.68

If one compares the growth in the various sectors prior to economic liberalization (pre-reform period) with the corresponding growth after liberalization (post reform period), one may arrive at the conclusion that service sectors had the major impact and in secondary sectors, the impact was nominal.  Out of the three, primary sectors had the least and one may even say that there was hardly any impact of economic liberalization on this segment. Within service sectors, Communication, Banking & Insurance, Hotels & Restaurants, Trade, Real Estate, Ownership of Dwellings & Business Services and Other services Sectors had the significant growth impacts of the economic liberalization.  Construction followed by Transport by other means had moderate impact.  Manufacturing sectors also had marginal impact and it was little better for registered manufacturing sector.  For railways and storage too the impact was very marginal.  For other sectors like Mining, Electricity Gas & Water Supply and Public Administration & Defence, there was no impact at all if the growth observed is the guiding parameter.

The growth rate has slowed significantly in the first half of 2012.  India's GDP growth rate became lowest in 2012-13 over a decade, as it grew merely at 5%. This led to criticism of India's economic reforms.  Criticism is more pronounced as it never had double digit GDP growth after India's economic reforms.  It apparently failed to address employment growth and also exports growth - and thereby leading to a worsening level of current account deficit compared to the prior to the reform period.  The traditional sectors within primary and secondary sectors, mainly agriculture, mining, electricity and manufacturing sectors did not have the required impetus of reforms.  Major chunk of our population depends on these sectors for their livelihood.  Thus, poverty could not be addressed effectively so far by the undergoing economic reforms.   Any person, if he is not able to meet his requirements in terms of food, clothing and shelter, considers that he is very poor comparatively even if he is able to fulfill calorie requirements of his family by any means and then looks towards the Governments for reliefs as much as possible.  In his thinking he remains a person below poverty line whatever Government defines the same by the help of its appointed expert groups. For such persons all the figures we mention are meaningless and he considers that the economic reforms are reaching more to the haves.