Indian Economic Reforms

Indian Economic Reforms: Indian Economy showed growth post introduction of reforms; when the Indian government began implementing major economic reforms in 1991 to increase the role of the private sector, improve the governance of the economy, and gradually introduce more liberalized policies. 

Furthermore, to increase the competitiveness of the Indian economy and stimulate the growth of the manufacturing sector, the government began focusing on a reduction of import tariffs, the liberalization of trade policies, and changes in the foreign investment regulations. It has also introduced reforms related to taxation and market operations, including the withdrawal of some subsidies and the liberalization of monetary policies.  

Also, to encourage the growth of a more inclusive economic sector, the government began expanding the infrastructure and social sectors of the Indian economy.

Another issue which the Indian economy faced was the capital flight out of India. Until the year 2002, Indian rupees had been the most widely accepted foreign currency in the world. However, because of the decline in the value of the Indian rupee against the U.S. dollar, the profit incentive to invest in India dwindled.

Also, in the short run, the rapid withdrawal of foreign money had a direct impact on the investment decisions of the Indian economy. In this way, the demand for foreign currency had weakened and the value of Indian rupees had fallen. The Indian government continued with the policy of giving subsidies and discouraging savings. Also, it adopted new measures to curb capital flight.

The government-imposed restrictions on the use of rupees for making purchases from foreign vendors. The value of the currency was rapidly reduced through the restrictions and incentives offered by the government. This also encouraged the growth of Indian exports. After years of depreciating against the U.S. dollar, the Indian economy started showing signs of recovery.

Similarly, the government also implemented other steps to make the economy more competitive. The Indian economy was also among the top performers in the Gini index. The Indian government then took steps to reduce the tariff levels and eliminate subsidies. In addition, the Indian economy became more democratic and representative.

More Indian businesses were allowed to become profitable through the implementation of incentives and tax reductions. This further resulted in a decrease in the dependence on foreign investments and helped to increase the level of private capital in the Indian economy.

With the economic policies introduced by the government of India, the economy started showing significant growth. Inflation in India dropped significantly and the poverty rate also fell rapidly.

During the period from 2001 to 2011, the Indian economy grew at an average annual rate of 5.3% per year. According to the Indian government, in 2005, 60% of the Indian population owned some form of agricultural land. However, the income of the farmers was much lower than that of the non-farmers, despite the higher production of crops. At the same time, the GDP per capita of the non-farmers in India was higher than that of farmers by 13.5%, by 9.3%, and by 17.5% respectively. 

In addition, employment in the agriculture and industrial sectors continued to grow. In 2005, the number of agriculture and manufacturing workers grew by 5.6% and 7.8% respectively. Overall, agricultural employment was around 80% of the total employment.

In 2011, the Indian government announced a five-year economic plan. The plan focused on the further expansion of the Indian economy. It also introduced a series of reforms to further encourage the growth of the economy. With the implementation of such reforms, the Indian economy continued to improve and the poverty rate declined even further. The poverty rate decreased from 39% to 28.6% in 2011, which was the first time in three decades that poverty rates had fallen to such a low level.

Mr. Radhakrishnan narrated; the prevailing economic policies in India were designed to increase the growth rate. However, they were not prepared to respond to various changes in the investment pattern of the non-farmers. Also, the contribution of non-farmers in the GDP had fallen significantly.

The fact that there was a decline in the investment of non-farmers and a consequent decline in the contribution of non-farmers to the GDP was a very important change in the economic policy. This change in the investment pattern of non-farmers resulted in a decline in their income levels and thus prevented their financial gains from increasing. It was also a cause of the decline in the overall growth rate of the non-farmers.

Results of Economic Reforms by the Indian Government: However, Indians are fully aware of the right policies that need to be implemented by the Indian government. Among the top priorities of the Indian government are to launch a nationwide economic reform program, create employment, create more affordable houses and reduce poverty levels in India. 

A massive focus on better economic reform and industrialization is part of India's new initiative to strengthen its economy and attract foreign investments to boost job creation. Although in principle the implementation of these initiatives will improve economic conditions in India and provide more employment opportunities in the economy, in reality, economic reforms may not be as effective as many think.

India is the fourth-largest economy in the world with an impressive GDP of roughly $2.5 trillion. It has substantial exports that have also shown growth. On the other hand, the country has a relatively higher number of unemployed individuals; however, there is a lot of debate over the actual job situation in India.

 

Conclusion: Over the last five years India has witnessed high growth rates. Nevertheless, within the last year, the Indian economic growth rate has shown a decline in economic growth, as the majority of economic indicators are showing an increase in unemployment rates. The result is, many of the economic reforms by the Indian government might not result in higher employment rates for Indian citizens. The economic reforms seem to be good for the economy and attract foreign investors, but for those living in poverty and unemployed the reforms will not provide many new opportunities. 

According to industry observers, several major initiatives have been taken to implement their ideas and work plans. According to them, the first is the launch of the dashboard. The idea is to provide aggregated data and transparency in various areas, and for greater efficiency in decision making. To facilitate participation from all the departments and state-level governments, the dashboard will be kept public-facing.

The Indian economy will grow by 7.3% in 2021 and further by 5.9% in 2022 as per the World Economic Situation and Prospects reports.

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