Then finance minister Manmohan Singh giving final touches to the budget for 1991-92. The 1991 reforms, or liberalization of the Indian economy, unleashed forces that could no longer be held back nor, indeed, reversed. (Then finance minister Manmohan Singh giving final touches to the budget for 1991-92. The 1991 reforms, or liberalization of the Indian economy, unleashed forces that could no longer be held back nor, indeed, reversed.)
Then finance minister Manmohan Singh giving final touches to the budget for 1991-92. The 1991 reforms, or liberalization of the Indian economy, unleashed forces that could no longer be held back nor, indeed, reversed. (Then finance minister Manmohan Singh giving final touches to the budget for 1991-92. The 1991 reforms, or liberalization of the Indian economy, unleashed forces that could no longer be held back nor, indeed, reversed.)

The before and after of Indian business

Independent India's business history is clearly split into two partsbefore and after liberalization in 1991

New Delhi: There is something magical about the first few steps taken by a newly independent nation. It is almost like a tiger just uncaged: it looks around, adjusts to the unfamiliar feeling, then lets out a series of roars, each one sharper and more strident. That’s how the history of India looks in those first few years after independence, a series of increasingly more ambitious steps announcing its intent and laying down its markers in the new world.

What strikes you most when you look at these milestones is the vision and foresight of our early planners. An atomic reactor in 1956, the first Indian Institute of Technology by 1958 and the first Indian Institute of Management in 1961, all remind us of their pioneering work.

It seems fairly simple now but consider a nation beset by the teething problems of an infant democracy. How utterly wasteful and irrelevant all this must have seemed. Yet, in an era of enlightened chief ministers and a Jawaharlal Nehru-led government replete with a scientific temper and a progressive mindset, the seeds of the future were being sown even as current fires were being doused.

These institutes also ensured that when the decisive push to a modern free market economy came in 1991, the talent pool was already in place to tap the ensuing opportunities.

Sadly, the promise held out by these developments soon fizzled out. A five-year plan for a five-year-old country has a different connotation in the 20th year. In the first instance, there is exhilaration and hope, in the second regret and disappointment. By the 1960s, politics had started taking over from idealism. The immediate provocation came when the Congress found itself facing stern tests in elections in the states as well as at the centre. A new set of leaders, who engineered a political appeal based on their perceived pro-poor platform, had emerged. Under pressure, the Congress did what cornered governments have always done—it took to nationalizing assets such as banks, insurance, mines and oil companies. It was the beginning of the pseudo-socialist era for the Indian economy, a period when growth was capped at the notorious Hindu rate, ensuring the country was a chronic underperformer.

Indeed, the decades of the 1960s and 70s were among India’s most difficult years, when wars, famines and industrial and political unrest combined with economic shocks to create a volatile cocktail which exploded in June 1975 with the imposition of Emergency.

Strangely, the restoration of democratic rights after 21 months of the Emergency also marked the coming of age of Indian business. And it wasn’t just the old business families who were re-energized. Even as the initial public offering by Reliance Industries Ltd was creating waves, another revolution, driven by a set of young and technologically savvy entrepreneurs who gave up well-paid jobs to set out on their own, was also taking shape. Men like Prem Shivdasani, Shiv Nadar and Azim Premji, along with N.R. Narayana Murthy and Nandan Nilekani, spotted the latent opportunity the personal computer presented. Through the 1980s, they experimented with products and services before homing in on the off-shoring model. Regardless of the current travails of the sector, it is undeniable that this was the industry which secured India’s place at the high table of the world’s top economies.

The end of the decade also saw the rise of the non-banking financial services business, a critical milestone, since that’s what would fuel the consumer boom of the 1990s and provide much-needed heft to the domestic consumer market.

The events since 1991, when the threat of a sovereign default pushed the P.V. Narasimha Rao government into unraveling a series of reforms, are well chronicled. Much of what we are seeing today is directly related to that seminal event.

As Brutus reminds us in Julius Caesar, “There is a tide in the affairs of men. Which, taken at the flood, leads on to fortune". After 1991, the forces that were unleashed could no longer be held back nor, indeed, reversed. Independent India’s business history would henceforth be split into two parts—before and after liberalization.

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