1991 Reforms : Report Card

25 years of 1991 reforms

Positives:
  • De-regulation
  • De-licensing
  • Investment friendly environment
  • Government monopoly and license-quota-inspector raj abolished.
  • Private sector role increased in infrastructure, mining, telecom etc.
  • Service sector opened (now contributes > 60%) -> IT, BPO, KPO etc.
  • Problem of Foreign Exchange Reserve solved (now ~ $350 billion)
Negatives:
  • Increased exposure to global shocks (1997 ASEAN financial crisis, 2008 collapse and now EU crisis)
  • Hot money (FII), currency volatility, black money, tax avoidance etc.
  • Retrenchment-> loss of employment
  • Problems of inflation, CAD, Fiscal Deficit etc. still persists
  • It was expected that the New Industrial Policy, unveiled in 1991, would bring boom in manufacturing sector in India and India would soon take its place among the manufacturing powers of East Asia. It didn’t happen.
  • It was hoped that after 1991 crisis government would control their fiscal deficits. But by 2000-01, the combined fiscal deficit of the centre plus the states, as a percentage of GDP, had risen beyond the 1991 level
  • Still low tax-GDP ratio. Central government’s gross tax revenues as a percentage of gross domestic product have remained below the 1991-92 level
  • Economic liberalization has failed to provide secure and decent jobs to the mass of the population