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INDIA'S REFORMS STORY

COURTESY GIGI SCARIA
COURTESY GIGI SCARIA

The 30 years that changed the country

  • Today, India’s economy is facing exceptional headwinds yet again, battered by a pandemic.
  • A potentially historic budget is at our doorstep. The circumstances are ripe for deep reforms.

Purchasing power has surged
The Phoenix Market City mall in Bengaluru
The burst of reforms of 1991 made it easier to do business in India—foreign companies were allowed into different sectors and private Indian companies also flourished Art: The Tourists by Nayanaa Kanodia, mixed media on paper  (Courtesy: Nayanaa Kanodia/Gallery Veda)
The burst of reforms of 1991 made it easier to do business in India—foreign companies were allowed into different sectors and private Indian companies also flourished Art: The Tourists by Nayanaa Kanodia, mixed media on paper (Courtesy: Nayanaa Kanodia/Gallery Veda)

India: then and now

India’s tryst with economic freedoms began in the early 1990s, but it is a promise that has been fulfilled only in part. While the average Indian may be better off, only a few benefited tremendously

A still from Band Baaja Baaraat
The gold standard for a good job—a written contract for 3 years along with benefits—is within reach for only 2% of the workforce. Art: Conditions Apply (from Triumph of Labour series) by Srinivasa Reddy N, watercolour on paper  (Courtesy: Srinivasa Reddy N/Apparao Galleries)
The gold standard for a good job—a written contract for 3 years along with benefits—is within reach for only 2% of the workforce. Art: Conditions Apply (from Triumph of Labour series) by Srinivasa Reddy N, watercolour on paper (Courtesy: Srinivasa Reddy N/Apparao Galleries)

Employment generation is a job half done

The solution to the jobs problem, which has been discussed in Delhi’s policy corridors for 20 years, is a swift expansion in low-skill manufacturing

Vijay Kelkar, former finance secretary and chair, 13th Finance Commission.
K.V. Kamath, former chief, New Development Bank of BRICS nations.  (Photo: Reuters)
The economic reforms agenda for the healthcare sector will remain unfulfilled till India is able to truly achieve universal health coverage. Art: Welcome to the Loot, by Manish Sharma, fibreglass and 24ct gold leaf  (Courtesy: Manish Sharma/Gallery Veda)
The economic reforms agenda for the healthcare sector will remain unfulfilled till India is able to truly achieve universal health coverage. Art: Welcome to the Loot, by Manish Sharma, fibreglass and 24ct gold leaf (Courtesy: Manish Sharma/Gallery Veda)

The healthy competition of an open market

Strong political will and decisive administrative action will help the country build a future-ready, resilient and competitive healthcare industry in India

Ruchir Sharma, head of EMs, Morgan Stanley Investment Management
Post-liberalization, tweaks to policy were made to ease trade, and the environment ministry has facilitated clearance for industry and found ways to extract resources within its purview. The Free Stamp, by Claes Oldenburg and Coosje van Bruggen, is the world’s largest rubber stamp  (Photo: Alamy)
Post-liberalization, tweaks to policy were made to ease trade, and the environment ministry has facilitated clearance for industry and found ways to extract resources within its purview. The Free Stamp, by Claes Oldenburg and Coosje van Bruggen, is the world’s largest rubber stamp (Photo: Alamy)

Ignoring the environment is bad economics

While liberalization brought new ideas of global finance and free markets, it nudged India to the brink of an ecological crisis

As the licensing system was dismantled, new market entrants with more capital and superior technology ate into older companies’ share. Art: Fat Boy with Red Chocolate by Rajesh Deb, 2016, woodcut on canvas (Courtesy: Rajesh Deb/Art Heritage for Tapx4)
As the licensing system was dismantled, new market entrants with more capital and superior technology ate into older companies’ share. Art: Fat Boy with Red Chocolate by Rajesh Deb, 2016, woodcut on canvas (Courtesy: Rajesh Deb/Art Heritage for Tapx4)

Keeping alive the good, old family business

Family businesses post 1991 were shored up by the arrival of the next generation, many of whom were educated and had worked outside India

Apollo Hospitals founder Prathap C. Reddy and his daughter and vice-chairperson Preetha Reddy.
Post-1991, laws primarily changed because of WTO obligations or competition, and not because it was explicitly on the agenda. Art: Hesitant Attempt by Gigi Scaria, 2018, Bronze  (Courtesy: Gigi Scaria/Chemould Prescott Road)
Post-1991, laws primarily changed because of WTO obligations or competition, and not because it was explicitly on the agenda. Art: Hesitant Attempt by Gigi Scaria, 2018, Bronze (Courtesy: Gigi Scaria/Chemould Prescott Road)

Why legal reform remains an afterthought

Reform policies are largely shaped by economists who do not possess institutional appreciation, and so legal reform rarely features in any discussion

N.K. Singh, chairman of the 15th Finance Commission. (Photo: Mint)
There have been reverses in trade policy, and the principal opposition today to 1990s-styled liberalization is spearheaded by ministers within the government rather than industry. Art: Tape Recorder by Anjaneyulu G, 2019, oil on linen  (courtesy: Anjaneyulu G/Art Ali)
There have been reverses in trade policy, and the principal opposition today to 1990s-styled liberalization is spearheaded by ministers within the government rather than industry. Art: Tape Recorder by Anjaneyulu G, 2019, oil on linen (courtesy: Anjaneyulu G/Art Ali)

Have we forgotten all about 1970s socialism?

The pushback against liberalization and new protectionist policies and language indicate a dangerous nostalgia for control over industry

GDP growth is only one measure of progress; others such as poverty reduction, educational achievements and health indicators are equally important, says economist Ahluwalia. Art: Charming Nation by N.S. Harsha  (N.S. Harsha/Chemould Prescott Road)
GDP growth is only one measure of progress; others such as poverty reduction, educational achievements and health indicators are equally important, says economist Ahluwalia. Art: Charming Nation by N.S. Harsha (N.S. Harsha/Chemould Prescott Road)

1991 reforms aimed at more than just BoP crisis

The balance of payments (BOP) crisis was the immediate trigger but the other challenge was problem of slow growth, says Montek Singh Ahluwalia

In a newly opened-up economy, first-generation entrepreneurs pushed forward, unsettling the traditional pecking order. Several prominent business family groups collapsed entirely, others simply slid down the rankings. Art: The Indian Ambassador by Sunil Padwal, 2020  (Courtesy: Sunil padwal/Galleryske)
In a newly opened-up economy, first-generation entrepreneurs pushed forward, unsettling the traditional pecking order. Several prominent business family groups collapsed entirely, others simply slid down the rankings. Art: The Indian Ambassador by Sunil Padwal, 2020 (Courtesy: Sunil padwal/Galleryske)

The emergence of 4 species of Indian goliaths

Post 1991, Indian entrepreneurs curious to explore the world’s markets and technologies were encouraged rather than discouraged by the state

One of the great paradoxes is that Indian industry is capital intensive despite the country having surplus labour. Job creation in industry has been weaker than expected. Art: The Dismantled Wheel by Prabhakar Pachpute, 2020  (Courtesy: Prabhakar Pachpute/Experimenter)
One of the great paradoxes is that Indian industry is capital intensive despite the country having surplus labour. Job creation in industry has been weaker than expected. Art: The Dismantled Wheel by Prabhakar Pachpute, 2020 (Courtesy: Prabhakar Pachpute/Experimenter)

Three decades on, India is again at crossroad

India needs to help create 100,000 competitive small enterprises over the next 10 years if it hopes to create 100 million well-paying jobs by 2030

Rakesh Mohan, President and Distinguished Fellow of the Centre for Social and Economic Progress
Rakesh Mohan, President and Distinguished Fellow of the Centre for Social and Economic Progress

'A moment 30 years ago that had been a year and a half in the making’

The President and Distinguished Fellow of the Centre for Social and Economic Progress narrates how the logic-defying system of industrial controls was dismantled, and discusses policies required to deal with the emerging challenges of redeploying labour

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