The Big Picture- 25 Years of Economic Liberalization: Where are We?
In the recent past, India has seen a rapid transformation in her economy yielding a different perspective altogether for the country from rest of the world. The economic reforms of 1991 (liberalization, privatization and globalization) not only affected our economy but also affected the way we live dramatically.
There were various short and long term reasons behind these reforms like:
- Bad fiscal situation of India
- Foreign obligations to be fulfilled
- Stagnant growth of employment
- Creation of more wealth, job and reduction of inequality
The economic reform policy aims towards greater freedom for doing business outside government control, reducing the role of public sector while giving more space to private sector and doing away with MRTP/FERA act. It also advocated foreign investment policies to attract foreign investment in the country.
On the flip side, we need to see that the economic reforms have proved to be beneficial only for a few sectors like finance, trade, investment etc. Other sectors didn’t reap much benefit from the reforms like manufacturing. Service sector grew at a much faster pace in comparison to manufacturing and agricultural sectors.
There is a missing link in the Indian economy where the services sector grew faster than the manufacturing sector which ideally should have been the other way round. The sector contributing the least to the GDP has maximum dependence on it (agriculture) and the sector contributing most to the GDP depends least on it (services). As an outcome, the gap of inequality is increasing further. The benefits of the reforms have not percolated to agricultural sector due to which we find disguised unemployment in this sector.
What needs to be done?
- Creation of opportunities for skill development/formation of the unemployed (Skill India, Make in India) and putting more focus on unorganized sector of the economy.
- Focus needs to be shifted towards social sector like irrigation, rural electrification, better communication facilities in villages, education (Sarva Shiksha Abhiyaan, Mid-day meal Scheme) and health (NRHM, National Sanitation Campaign).
- Employment opportunities for the masses (MNREGA) providing livelihood, means of income, increasing purchasing power to reduce absolute poverty levels.
- Increase agro-based industries in the country.
- Labour reforms and increase in their wages as the labour laws were framed much before independence and today’s scenario has changed drastically.
Putting focus on one side of the coin only cannot be a complete parameter of measuring success of these reforms. In our zeal and enthusiasm of reaping benefits from these economic reforms, we need to keep in mind that still there is a part of population which is living under abject poverty in the country. We need to bring them in sync and further integrate them with these reforms. This is the real challenge that needs to be addressed today on a priority basis.