After nearing 25 years, does India needs reforms once again
What is Reform
Reform is a process to bring change for betterment of peoples health, education facilities being offered, the way business is done in the country, change in the mind set of people, creating awareness about governance, enabling youth getting employment.
Why Reforms Required in India in 1991
India saw was economic reforms in year 1991. India was facing severe Balance of payment crisis in 1991 which forced it to adapt structural economic reforms under IMFs directions. The need for a policy shift had become evident much earlier, as many countries in east Asia achieved high growth and poverty reduction through policies which emphasized greater export orientation and encouragement of the private sector. Growth in India in 1980s was fuelled by debt which culminated in crisis in 1991. There was a requirement of stable growth with stable financial condition in the country.
Impact of 1991 reforms in India
The average growth rate in the ten year period from 1992-93 to 2001-02 was around 6.0%, which puts India among the fastest growing developing countries in the 1990s. Growth in the 1990s was accompanied by remarkable external stability despite the east Asian crisis. Poverty also declined significantly in the post-reform period. The newneo-liberalpolicies included opening for international trade and investment,deregulation, initiation ofprivatisation, tax reforms, and inflation-controlling measures. The fruits of liberalisation reached their peak in 2007, when India recorded its highest GDP growth rate of 9%.With this, India became the second fastest growing major economy in the world, next only to China. AnOrganisation for Economic Co-operation and Development(OECD) report states that the average growth rate 7.5% will double the average income in a decade. A huge private sector emerged, Income Tax Department and Customs Department became efficient in checking tax evasion, foreign investment in India grew from a minuscule US$132million in 199192 to $5.3billion in 199596.
Present problems in India
Economy needs an overhaul after haywire prices. High food prices have been emblematic of our inflation woes, as onion prices, along with most vegetables, have quadrupled ahead of a general election. Indias wholesale inflation has breached 7% and retail inflation has touched double-digits at 10%, as consumers continue to battle a sticky spell of high prices, deepening problems for a government trying to push growth.
Creation of jobs outside of agriculture is one of the biggest challenges that confront the policy makers trying to achieve faster, sustainable and more inclusive growth. For this to happen, growth or rise in earnings, greater investment and, above all, speedier project implementation, are necessary conditions.
Unorganised sector needs to get priority as millions of small, micro and medium enterprises that are spread across the Mumbais Dharavi slum township, in the waste-recycling units of outer Delhi. Put together, these grubby factories contribute to half of Indias factory output, 45% of exports and employ more than 60 million people.
Least recognized is the ailing agriculture sector, which employs half of Indias population, about 600 million people, produces no more than 15% of GDP and lives from monsoon to monsoon. Without any rapid improvement in infrastructure, education, or institutions there will be fewer jobs created outside of the farms increasing pressure on land and lowering incomes. Introducing urgent reforms in agriculture, Indias most unreformed and least productive sector, should, therefore, be at the core of current policy-making.
Rapid obsolescence and the fast-falling cost of technological acquisition are adding to the growing divergence between skills and jobs on offer, which can result in serious sociological imbalances. The idea of a permanent job has more or less disappeared.
A modern, competitive economy will have to offer its citizens an abundance of options to positively exploit a basket of opportunities. To be sure, more than two decades of reforms have only increased economic freedom by a very large degree. For instance, the set of choice of desirable jobs for a young graduate has expanded vastly from medicine, engineering, and government services earlier to working in a coffee bar to a retail superstore now.
It is vital for the government to press ahead with critical reforms, some of which need to be voted into law by Parliament. Hiking the FDI ceiling to 49% from the current 26% in Indias rapidly growing private insurance sector is more about reversing the slowdown in Indias economy, and less about allowing foreign investors access to household savings. India is in dire need of resources to fund its infrastructure needs to build highways, ports, airports and railways.
Investment decisions are well thought-out and predicated on a variety of factors including global perceptions about the destination country. Importantly, we cannot lose sight of the fact that India will be competing with other emerging nations to attract from the same pool of dollars.
What is clear is that whoever forms the government in 2014 must have a stomach for unpopular choices to revive the economy and provide clean governance. Whether it is the crying need for governance reform, fresh investment in crumbling urban infrastructure or addressing our shortcomings in the fields of health and education, much needs to be done. Challenges are all around us, but solutions are also within sight. Over the next few days, HT will carry columns by experts across various fields, offering their advice on ways in which we can solve these problems in the coming months and years.
How to solve problems by bringing Reforms in Present India
There are reforms happening like RTI, Land Acquisition, Lokpal and Companies Act in 2013 but at the same time still in India Insurance sector, Higher education sector reform to enhance R&D facilities, reforms in Agriculture, Goods and Services Tax (GST), infrastructure regulation, and ease of doing business reforms are pending since long. Very little is done to make business environment in the country more conducive.
A recent World Bank study ranks India at 134th position among 189 countries in terms of ease of doing business.
Why Direct Benefit Transfer scheme to plug subsidy leakages should have started much earlier, not in the penultimate year of the government.
Faced with the daunting task of lowering stubbornly high inflation, RBI needs to reduce interest rates and tight monetary policy should be changed to bring liquidity in market.
In a situation where demand is slowing down due to inflation, the administrative and bureaucratic procedures need to be time-bound and fast-tracked so that investments can be rapidly stimulated.
Due to corruption in the country the decision making has slowed down. Tax payers money is not being utilized for development. The accountability & transparency is missing from the government.
The people of India needs to feel safe & secure through require legal safeguards specially women safety is not being ensured across major cities which is denting the confidence of women from going out of home while there is greater need of women participating the work places.
Good governance is at the very heart of economic growth and poverty reduction, and even political legitimacy is one of the undisputed lessons of development experience from aroundthe world. In our own country, we have seen vast differences across states in development outcomes from out of the same mix of development policies.
Author : Munesh Meena,
References
1. Economic Reforms in India since 1991: Has Gradualism Worked?by Montek S. Ahluwalia
2. http://en.wikipedia.org/wiki/Economic_liberalisation_in_India
3. http://www.hindustantimes.com/india-news/hindustantimesleadershipsummit2013/what-india-needs-in-2014-leadership-for-reforms/article1-1156130.aspx
4. http://www.firstpost.com/business/india-inc-pleased-with-new-laws-in-2013-but-want-more-reforms-1307517.html
