LPG & The Economic Reform Policy
Every Indian still remembers Pamulaparthi Venkata Narasimha Rao (June 28, 1921 – December 23, 2004) who had served as the ninth Prime Minister of India from June 21, 1991 to May 16, 1996. Rao is often referred to as the ‘Father of Indian Economic Reforms’, as he had introduced fundamental reforms to the economy, or Liberalisation, Privatisation and Globalisation (LPG) of the Indian Economy. Those significant changes had given the Indian Economy a new impetus and rhythm. Future Prime Ministers Atal Bihari Vajpayee and Dr Manmohan Singh continued the economic reform policies pioneered by Rao’s Government. India’s share in the World Economy has tripled in the last three decades, rising from 1.1% to 3.3%. Meanwhile, the value of the US Dollar has grown 11 times in recent times. Only China and Vietnam are in a better position than India as far as economic development in concerned. India also ranks slightly better than other countries in terms of key indicators of Human Development (mainly life expectancy and education), securing its place in the list of Moderate Development category. Once, India was the 12th largest economy in the world. It is expected that the South Asian Nation will emerge as the world’s sixth largest economy by the end of 2021.
India’s position may seem very encouraging, compared to other countries, in the last three decades. At the same time, one has to admit that India has failed to implement various important policies. Since 1991, India has successfully lifted a large portion of its population above the poverty line. Still, India is at the top of the list of the countries with the maximum number of poorest people (outside Africa). According to a 1990 Report prepared by the International Monetary Fund (IMF), 90% of the 150 countries were in a better position than India as far as Per Capita Income was concerned. At present, 75% of 195 countries are in a better position compared to India. India’s average Per Capita Income is less than one-fifth of the global average Per Capita Income. Although economic inequality has certainly increased, no reliable statistics have been available in this regard since 2011!
India’s economic journey has experienced many ups and downs in the last three decades. The economic scenario was more promising in the first two decades (1991-2011) than in the third decade (2011-21). Many backward countries (compared to India) have moved forward during this period of time. Bangladesh, the Philippines and Vietnam have made steady economic progress in those years. Of course, Latin America’s Gross Domestic Product (GDP) has declined in the past 10 years, the sub-Saharan Africa has been going through an economic crisis, and the five ASEAN Nations (Indonesia, Malaysia, the Philippines, Singapore and Thailand) have been struggling to boost their economy. From that perspective, India is performing really well. However, one should notice that India’s GDP was 36% of that of China’s in 2001. The figure has dropped to 18% in last 20 years. India’s contribution to the World Economy has been highlighted globally in recent times, but China is far ahead of India in terms of economic prosperity.
It was quite difficult for the Indian Economy to overcome its relative weaknesses in the post-2011 period. The COVID-19 Pandemic has not only ruined all those possibilities, but has also created new obstacles to economic progress. The Government of India, led by Prime Minister Narendra Modi, has failed to create employment opportunities in the last seven years. The situation has deteriorated further since the outbreak of COVID-19 in December 2019. Millions of Indians are living in Below Poverty Line (BPL). At the same time, small economic enterprises have been forced to stop their activities. Economic inequality is becoming more prevalent. In such a situation, the Indian Economy requires productivity stimulation and cleaner infrastructure.
Interestingly, the Narendra Modi Administration has seemingly paid more attention to external infrastructure, and ignored the public welfare projects. However, both, it is felt, require equal attention. The Government did not take any drastic step to improve the quality of Human Resources. It may be noted that Human Resource was the basis of economic growth especially in East Asia half a century ago. When India decided to achieve the goal to become a USD 5 Trillion Economy, the Modi Administration did not make an attempt to raising the literacy rate from 74% to 100% or to improve the quality of the Health Care system. Hence, India has failed to tackle the second wave of COVID-19 Pandemic that had quite a negative impact on the Indian Economy.
India, still, does not have a well-functioning economy and infrastructure to meet the needs of people stressed and struggling with debt. The only way for the lenders to get their money back is to declare the borrowers bankrupt. Restructuring of the Credit System is essential at the moment to help survive the small and medium businesses. The economy cannot survive by destroying trade. Right now, the most important thing, both in terms of economy and public welfare, is to create job opportunities. For that, the Government needs to implement labour intensive policies. Much has not been done in these fields in the last 30 years, and even in the previous three decades. The progress of the Indian Economy in the next 30 years will depend upon this…
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