Column

Thanks to the reforms, the economy continues to grow in leaps and bounds

The Indian economy, which resembled a centipede with arthritis till the advent of reforms — slow-moving, underperforming and swearing by the public sector as the panacea for all the ills plaguing the country — is now a star performer.

Signs of dynamism are everywhere, the essence of which is mirrored in the sustained high rate of economic growth. Indeed, when the advance estimates for 2007-08 indicated a real GDP growth of 8.7%, critics flayed the government for this “poor” showing. So much for a nation that was once derisively condemned to experience what Prof Raj Krishna has called the “Hindu rate of growth.”

Clearly, we have arrived at a stage of development when what is good is not deemed good enough and like Oliver Twist, we want something more.

Under the reforms, a totally radical set of policies was set in motion. The revolution of rising expectations, which four decades of planning had promised but did not quite deliver, now seems to be on track to bettering the lot of the masses, unleashing the springs of enterprise and to greater integration with the rest of the world.

Since the reform era set in motion, after a good 40 years of missed opportunities, the nation’s balance sheet has more credits than debit entries.

There are various strands to this saga of transformation. The first shot was fired at the dawn of the nineties.

The economy was opened up. The public sector was effectively dethroned and the private sector was to be in the vanguard of development. The regime of controls and the plethora of strangulating rules and regulations was progressively loosened. Death knell sounded for licence raj.

Thus, the economic crisis of mid-1991 galvanised the government and the old shibboleths were abandoned in favour of a more free order. The officialdom existed under the new dispensation to provide a facilitating environment and for enactment and enforcement of a broad regulatory framework under which the economy could work and function with a high degree of freedom and initiative. In retrospect, the economic reforms did much to usher in positive changes in the country.

At the financial sector, reforms matched those at the government level. The Reserve Bank of India went about in a no-nonsense fashion to implement the report of the first Narasimham Committee and later its second report. Public sector banks were made to conform to international norms and new banks in the private sector were allowed. Now, we have Universal banks rendering a multiplicity of functions. Indian banking truly underwent a second revolution, the first being when 14 banks were nationalised in 1969.

Indian stock markets were once described as those created by the brokers, for the brokers and of the brokers. This is no longer true. Trading volumes are enormous and online trading has become the norm. At the global level, economy was thrown open to foreign investment and the dominant hold of FERA was loosened so that overseas entities can set up shop here and even the sectors which were exclusively marked for the government were opened for private investment.

True, there are problem areas like the moribund agriculture and the worrying fiscal situation. They need attention if reforms have to make a positive impact on the economy. In both, though, a strategy is in place and one hopes the results would soon ensue.

In Industry, dynamism is the name of the game and competition the buzzword.

Of course, vestiges of control exist in sugar and petroleum, despite the promised transition to a deregulated regime in both.

Reforms have their plusses and minuses, but taking a holistic view, they have been a great success. They have helped shape a new vision of India the journey to which has begun. But, as always, we have miles to go. Every journey begins with the first step, goes a saying. This first step, as we have seen, is not tentative, though there is no denying that an arduous road lies ahead.