Paragraph on Economic Reforms in India!
In 1991, a comprehensive economic reforms package was drawn up and attempted to implement in India.
The reforms become inevitable in the face of the crisis that had engulfed the Indian economy by 1990-91.
The problems of the economy, which assumed alarming proportions in 1991, did not develop suddenly but accumulated over several years and may be attributed to the cavalier macro management during the 1980’s.
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The widening gap between the income and expenditure of the government led to mounting fiscal deficits, which had to be met by borrowing at home. This steady increase in the gap led to large current account deficits in the Balance of Payments (BoP), which were financed by borrowing, from abroad. Both the internal imbalance in fiscal situation and external imbalance in BoP were caused by imprudence in the macro management of economy. The attempt to live beyond one’s means pushed the country into a deep economic crisis.
The economic reforms in India implemented in two stages, namely (1) First Generation Reforms and (2) Second Generation Reforms.
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Now there is a general agreement that the process of economic reforms must be strengthened and deepened, sometimes described as implementing the second-generation reforms. Whereas there was a well-developed consensus among economists about the first order problems, which then afflicted the Indian economy policy, the same is not true for second-generation reforms.
The second generation reforms are the reforms in areas which have not formed part of the explicit agenda of reforms so far but now need to be brought in the top of the Agenda for the future course of reforms can be determined only after looking at the existing strengths and weaknesses of the country’s economy.
First, India’s economic growth is at present one of the fastest in the world. From frustratingly slow growth rates of 3.5 percent and 4 percent in the first three decades since independence, the country is today growing at an average of 6 percent per year. The Gross Domestic Product (GDP) grew at an average of 5.8 percent in the 1980. It accelerated to around 6.5 percent in the Eighth Plan period (1992- 97) and this is expected to be maintained in the Ninth Plan Period (1997-2002).
Secondly, human resources is a very important factor on which the future growth prospects of the country depend. Though India has prided itself on the quality of its highly skilled work force of scientists, engineers and more recently software professionals, the general level of education of the majority of its population has been very low.
Thirdly, the growth rate of population will determine how much benefit of growth will be available per person. Though India’s population today has crossed the one billion mark, one positive development is that growth rate of population has now come down.