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Directors and Directions: 25 years of Economic Liberalisation

On July 24, 1991, the then Finance Minister, Dr. Manmohan Singh created history by presenting the annual financial statement (The budget) which changed the fate of Indian economy forever. These reforms largely focussed on economic liberalisation, privatisation and globalization (LPG reforms) which not only opened the gateway of business for foreign firms but also it re-strengthened the value of Rupee in our country. For a country which ranked 17th regarding the size of the economy in 1991, today ranks 8th in the world; life expectancy has increased from 58.4 years to 67.7 years and, importantly there has been an overall growth in the lifestyle of we, Indians.


The Bleak Picture
However, considering the other side, some evident problems that persist in our country despite our “advancement” remain unchanged. Unemployment being one, the underdeveloped agrarian economy being next; then we have over-dependence of workers in the agriculture sector, malnourishment has also not been effectively curbed, and very recently the juggernaut scalability of corrupt practices has plagued the country. All this indicates that the original concept of ‘welfare’ as defined in the Constitution of India by its visionary framers, has not been met. Noble laureate Dr. Amartya Sen in his book, The Idea of Justice writes that even the concept of justice (covering equality of opportunities) which was supposed to be the bedrock of democracy (rational judgement of the majority) has not been achieved. It was not surprising to see the Chief Justice of India, Mr. T.S. Thakur, getting emotional over this very issue of delay in justice, prevalent in the country. It, therefore, logically concludes that the disparity between the rich and the poor has only increased over the years, and this is clearly not a sign of ‘prosperous’ progress, but more of a ‘segmented’ growth. India is presently at 135th place in HDI, but at fourth place in the dollar billionaires club of the world.

Setting the wave of change
India is seen as the fastest developing country in the world, and the driving factor has been the focus on primary industries of manufacturing and inland production. The share of service sector in the economic growth has also been rising, especially after the dot-com bubble, moving up to double digit figures. However agriculture industry, which employs 53% of the population, has shown the remarkably slow growth rate of less than 2%. Rabindranath Tagore said, “Food is a great source of wealth, food production is a source of misery.” Surprisingly of the 53% population; primary work cultivators amount to only 7.8%. Therefore argues, P.Sainath (in his work, Everybody loves a good drought) that formulating a strategic plan for phased waiving of farmers’ debt should have gained much importance by now as this 7.8% population is day by day dwindling.

Challenges are also present in the healthcare sector. Every third Indian is without safe and adequate water supply; every fourth child in the world who dies of diarrhoea is an Indian; every third person on this planet suffering from leprosy is an Indian; every fourth person on the globe who dies of water-related diseases is an Indian. Millions of Indians suffer from malnutrition; over 12.7 million out of 16 million cases related to tuberculosis exist in India at any time worldwide. Never in the history of Indian governance, has the government been able to spend more than 1.8 percent of GDP on health. The current figure of spending is 1.4 percent of GDP. Among the advanced industrial nations, Sweden spends 7.9 and the United States 5.6 per cent. When India got freedom, a 5 per cent outlay of her first five-year plan was committed to health, which reduced periodically. Regarding health infrastructures countries like China and Sri Lanka are way ahead of India. The Planning Commission suggested to increase the spending on healthcare up to 2.5% by the 12th FYP, yet it has not been met out till date. Most healthcare expenses are borne by the patients pocket and their families rather than through insurance. This led many households to incur Catastrophic Health Expenditure (CHE) which can be defined as the health expenditure that threats a family’s capacity to maintain a basic standard of living. As per a report around 35% of poor Indian households incur CHE.

The Silver Lining
Looking at a broader picture, urbanisation is part of world’s growth process. Statistically, in comparison with other countries, India has performed well on many parameters. But, in the social sector, India is far behind many emerging economies. There is a need of dedicated reforms for social sector and the rural sector. The reason for the rise in inequality is precisely this that in 1991 vast majority of the population had low levels of education and health. The ignorance of the people, unfortunately, deprived them of taking advantage of market friendly and growth-oriented policies. This was the foundational difference between India and other countries. Today we are at a stage when we can harness the growth driving sectors like industries, and deepen the finances in areas which did not benefit from the 1991 reforms. The growth picture as of today does not elude the successful stories of developing states like Gujarat, TN, Kerala, AP, which have already adopted the best practices. In MP, for past five years, the agriculture sector is growing at double digits. Thus, the lack of political will at state levels to some extent is also responsible for slow reform. India has right policies. The need is that state and districts implement it well so that the outcomes are visible, qualitatively and quantitatively. We need to learn from the 1991 reforms that emphasised more on the market-driven approach to balancing the same with a holistic approach towards the various sectors. Segmented and unconnected changes in agriculture or business will not help as the resources are limited. And hence, the resources have to be allocated in such a way that all the sectors have something to gain. More emphasis on agriculture and employment generation through investment pattern and choice of technology design changes can leverage the growth story.  Thus, the future course of action should be focused on greater concern for agriculture and an Industrial policy.

By:Harsh Vardhan Bisht


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