20 Years of India

7/31/2019 20 Years of India

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INDIA 20 YEARS OF

LIBERALISATION


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Background as to wat led to the liberalisaton

thingy

Then vs now

Aaj ke benefits-shining india

Whining india


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The generation which is in colleges today or even that generationwhich is busy preparing for Online CAT, would be surprised to knowthat the World without mobile phones, Orkut, Facebook, Googleand Internet in general existed and it was not too far. Just 20 years.There was a time when there was just one television channel, no

concept of breaking news, download and upload were the wordsassociated with luggage and buses. There used to be trunk calls andcomputers were kept only in offices. Outsourcing was unheard of,so was debit cards. The things that we take for granted today 100plus channels, Digital Films, Laptops, Mobile Phones, SocialNetworking, supermarkets and shops overflowing with goods,

Sensex getting covered on the front page of national newspapersall of them have been ushered in because of something happenedin India in 1991 around 20 years before. It was no less than arevolution, if we define revolution as a sudden and irreversiblechange. It is called Liberalization.


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LIBERALISATION


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India became independent in 1947 after almost 200 years of Britishrule. The founding fathers of the nation were keen to make India anexample for the World and they were cautious that the fledglingrepublic should not slip into chaos and anarchy, which was causeddue to the tragedy of partition. The British rule in India started with

East India Company, which in the 18th

century, was the largestmultinational company in the World. As a result, India was wary ofprivate, profit-seeking foreign corporations and also of theadvanced technology that they had an access to. So, in order toprotect its infant industry from the seasoned foreign competition, itclosed its doors to the rest of the World. In the year 1947, India was

poor, but still 10th

most industrial nation in the World and thesecond largest economy in Asia, after Japan. However, most of itsoutput was getting produced for its colonial master, the UK.


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The leadership had felt the need to developrapidly and it was understood that givingemphasis on markets and private sector would

be futile because they neither have the capitalnor inclination to undertake huge investmentsin infrastructure as their sole aim was to earnprofit.

government had to undertake thatresponsibility.


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On the lines of USSR, 5 year plans were introduced and since thetargets in these plans were impossible for the private sector, a hugegovernment or Public Sector was developed. Initially, the aim of thePublic Sector was to provide competition to the Private Sector, butgradually, the hold of Public Sector on the country started

increasing. Lot of areas such as aviation and life insurance werereserved for only public sector. Besides this, the private sector wasgiven the daunting task of getting various licenses and permits, tobe issued by government bureaucrats and a license raj wasdeveloped. To say that it was corrupt is an understatement. It wassclerotic, self-perpetuating, rigid and biased towards the big

industrial houses. As a result, whatever development happened inIndia was very much lopsided and uneven. Public Sector was alsosusceptible to political manipulations and business decisions weretaken on the grounds of political compulsions rather than economicsense


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operational restrictions as well. Acts like Monopoliesand Restrictive Trade Practices (MRTP) Act or ForeignExchange Regulation Act (FERA) were created with thenotion of clipping the wings of the private sector. Even

though a firm had a capacity to produce more, it couldnot produce more than its quota. Even though a firmwanted to import machinery, it could not do it withouthaving almost 80 different types of permits andlicenses. The only one thing on which there was no

government control was the population. From thedecade of 1960s, the population of India had grownvery fast causing population explosion.


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All these things collectively started gnawing on Indiasfuture in a decisive manner from the late 70s. TheOPEC oil shock increased the oil prices substantially,eroding Indias already weak foreign exchange

reserves. As a result, in 1980s, the government had toallow more exports and remove restrictions on exports,as the foreign exchange was necessary to buy theimports. However, these reforms were cosmetic anddid not really have any kind of far-reaching impact.

Finally, in 1991, the water finally had flown over thedam. India was left with very meagre resourcesforeign exchange was only for one week of imports


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Output was low, industrial growth was low andfor the first time in Indias economic history, itwas staring at default on interest and eventualbankruptcy.

Exports were too less than imports. So, there wasnot sufficient foreign exchange. So, India had toborrow.

Population was high but the jobs were not getting

created. Firms capacities were curbed by lawslike MRTP, so there was no output and noemployment.


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Demand was high due to population but supplywasnt, leading to inflation and black marketing.Due to this, the governments tax collection, for

both direct and indirect taxes was low, casingdeficit in the budget, which the government hadto bridge by borrowing.

Public Sector of India was inefficient as it was not

exposed to competition. It was also corrupt.Private Sector was left too weak by the constantinterference of the government.


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the 1991 reforms entailed a comprehensive, economy-wide approachthat focused on integrating India with global markets. Indeed, the 1991

reforms marked Indias neoliberal turn and followed, in design and

intent, the IMF and World Banks standard prescriptions for structural

adjustment (programs through which heavily indebted countries wereforced to liberalize their economies in return for IMF and World Bank

loans).

Once initiated, the reforms quickly took on a life of their own. Despite

multiple changes in government and a rather ponderous pace, they were

carried forward, widened in scope, and institutionally entrenched. Theresult, though not as dramatic as neoliberal ideologues might have

wanted, is a fundamental transformation of the Indian economy, and a

total reversal of the long-cherished ideal that the state must serve as

Indias engine of development.


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India opened up consumer goods sector,

causing a lot of imported goods coming to

India but not paid attention to infrastructure.

So, today we have Mercedes S class and pot-holed roads side by side.


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Indias government successive

governments, rather, regardless of the political

parties they belonged to had neglected

three key areas Agriculture, Education andHealth. So, today, we have 9% growth but half

of the population is illiterate, infant mortality

is slightly better than Africa and agriculture isstill subsistence level and dependent heavily

on rains.


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most of the states today vie with one anotherto grab a project of any significance, be itchemical, auto or even IT. In doing so, the

benefits they are offering, right from free landto tax sops are being given on a platter. Butthe benefits or savings that a company gainsfrom this does not affect the lower strata of

management, but remains in the hands of thetop management, thus depriving the formerof the economic benefits.


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Stats

Gallup data from 2010 suggest that only 5

percent of educated Indian adults would like

to leave India permanently if they could

While no comparable study exists for 1991 (or

before), anecdotal evidence suggests that far

more Indians were prepared to bid farewell to

their motherland some twenty years ago


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New india

The economy has grown at a brisk pace, withannual GDP growth rates reaching 7 to 9 percentin the last decade

India is now the worlds tenth largest economy,and when figures are adjusted for purchasingpower parity, it is the fourth.

It has become a global leader of sorts in sectorssuch as information technology (IT) and

pharmaceuticals, which performed remarkablywell even through the years of the globalfinancial crisis of 200809.


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signs of prosperity are everywhere: in opulent

shopping malls that specialize in luxury cars, in

glamorous cocktails parties that are hungrily

photographed by tabloids, and in the palatialhomes of Indias fifty-five known dollar

billionaires (an example of the latter is the

twenty-seven-story, billion-dollar home ofReliance Industries chief Mukesh Ambani, the

richest man in India).


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encouraging signs of meritocratic social mobility. It is nowquite common to hear of rags to riches stories, such asthat of IT guru and multi-billionaire N.R. Narayana Murthy,the cofounder and former chairman of InfosysTechnologies. Murthy, whose father is described as a poor

schoolteacher by admiring biographers, is said to haverisen in life through good, honest, hard work and anentrepreneurial ability to seize the opportunities thrown upby liberalization. Unlike Dhirubhai Ambani and otherrobber barons of the past, it is said, Murthy didnt have

to bend the rules to succeed. Murthys example ischerished by proponents of liberalization, as it suggeststhat a cleaner ascent to wealth is possible in the new India.


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A Rising Tide Lifts All Boats

has their immense wealth trickled down to thepoor?

World Bank, an institution that has provedunwavering in its support for the 1991 reforms. Itestimates that the proportion of people livingbelow $1 per day (in 2005 purchasing powerparity) steadily declined in India, from 42.1percent in 1981 to 24.3 percent in 2005. In

absolute numbers, this is impressivea fewhundred million human beings have been liftedout of wretched poverty.


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Indias record on poverty reduction seems even less praiseworthy.The governments self-assessments are cases in point. In 2009, thegovernment-appointed Saxena Committee concluded that 50percent of Indians are living in poverty.

National Commission for Enterprises in the Unorganized Sector(NCEUS), reported on many unpleasant facts about neoliberalreform, including that of jobless growth. The NCEUS found thatnew employment in the post-reform period had occurred mainly inthe unorganized (informal) sector, which is notorious for its paltrywages and precarious work conditions. It revealed, furthermore,

that workers in the informal economy make up almost 93 percentof Indias labor force, and of these, only 6 percent are protected bysome (usually meager) form of social security.


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The NCEUSs most controversial finding,

however, was that 77 percent of the countrys

population lives on less than twenty rupees

(about fifty cents) per day, and that a largeproportion of the worst off are from

historically marginalized communities, such as

Muslims and Dalits (members of low-rankingcastes previously known as untouchables)


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Displacement and Dispossession

states expropriation of land and natural resources for export hascaused social dislocations on an unprecedented scale. Thousands ofpeasants, fishermen, and indigenous peoples have had their livesand livelihoods disrupted or destroyed. Indeed, the Naxalite-Maoistinsurgency in the countrys south has its roots in the eviction ofindigenous communities from their land.

special economic zones (SEZs), the tax-exempt industrial areasthat are expected to boost Indias global exports. Their reportssuggest that much of the land for the creation of SEZs has beenacquired coercively, with state officials and private developerscolluding to exploit legal loopholes and evade fair compensation,

and summoning the police to back up their arm-twisting tactics.The result has been widespread rural distress.


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urban poor have not fared much better, thanks to the relentless quest to createworld-class and entrepreneurial cities. Municipal governments routinely razeslums, obliterating living quarters, community forums, and home-basedenterprises. Also common are beautification drives, wherein beggars, streetvendors, and homeless persons are cleared from public spaces like beaches, parks,and promenades, which are then spruced up and secured with cameras, guards,and gates for middle-class use. The 2010 Commonwealth Games, held in Delhi last

October, were marked by many such operations to beautify the city, and at anoutrageous price of $22.5 million, according to a report released by the AuditorGeneral in early August.

The displaced poor may have evaded starvation by clutching on to the lowestrungs of the new urban economy, but like their rural counterpartswho toil asfarm hands on daily wagesthey have lost a considerable amount of autonomyand dignity, and are often reduced to working long hours under constant

management surveillance, such as in the sweltering kitchens of fast-food chains, orin cramped sweatshops producing goods for the export market.


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UN study on sanitation revealed that morepeople in India have access to mobile phones(about half of Indias 1.2 billion-strong

population) than to toilets (about one-third). governments National Family Health Survey

indicated, moreover, that many of Indias healthindicators are worse than those of Bangladesh (in

maternal mortality and infant mortality) and evenof Sub-Saharan Africa (in the percentage ofunderweight children).


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expenditure on education has remained stuck at around 2.6percent of GDP, and on health at a little above 1 percent.Expenditure on defense, in contrast, has increased steadily,and is currently at 3 percent of GDP.

governments consistently meager expenditure on thesocial sector has been counteracted, to some extent, by awave of welfare programs and rights-based legislation. Themost significant of these is the National Rural EmploymentGuarantee Act (NREGA), a job-guarantee scheme enactedby parliament in 2005 and extended to every district in the

country in 2008. The program assures 100 days ofemployment to all rural households that apply. Anothermilestone is the passage of the Right to Free andCompulsory Education Act in 2009.


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Big money, big corruption

The governments half-hearted effort to

address the problem of corruption also

suggests that it isnt serious enough about

helping the poor. Twenty years ofliberalization have not led to lean, effective,

and transparent government in India. This is

yet another neoliberal promise that standsbetrayed.


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In 1986, Prime Minister Rajiv Gandhi stunned the countrywith his declaration that, due to corruption andmismanagement, only 15 percent of every rupee spent onpoverty-alleviation programs in India actually reaches thepoor. By all indications, not much has changed since then.

According to a 2008 study by Transparency International,Indias poor have to pay some $200 million in bribes everyyear to avail themselves of the most basic services. This,along with other findings, has led TransparencyInternational to consistently downgrade Indias ranking in

its Corruption Perceptions Indexfrom seventy-second in2009, to eighty-fifth in 2010, to eighty-seventh in 2011.(The index measures the perceived levels of public-sectorcorruption in 178 countries.)


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What needs to be recognized, however, is that liberalization has made things worse, not better, byprying open a vast number of new avenues for making a quick buck.

Most cases of flagrant corruption today are spawn of the liberalization process. The most notoriousof these was the 2G spectrum scam, in which cellphone licenses were sold for a fraction of theirvalue, resulting in the loss of a staggering $39 billion to the national exchequer. Over a dozen ofIndias most powerful politicians, civil servants, and journalists were implicated in the imbrogliowhen it surfaced in November last year, merely weeks after a series of corruption scandals bubbledup around the 2010 Commonwealth Games. The Auditor Generals report on the games has

confirmed fears that its organizers had committed nothing short of daylight robbery. The reportrevealed, among other things, that many lucrative contractsfrom buying toilets to building theathletes villagehad been awarded on the basis of single bids to favored vendors.

Indeed, the Commonwealth Games were a testament to the scale of Indias corruption problem,and to the sort of big money thats up for grabs in the countrys new economy. These prestigegameswhich organizers claimed would affirm Indias world-class statuscost taxpayers $4.1billion instead of the $270 million initially projected, mainly because the government gave a blankcheck to the organizing committee in its rush to meet deadlines and avert nationalembarrassment. Some $1.8 billion is said to have gone missing, and the head of the organizingcommittee has been in jail since April on corruption charges. WikiLeaks head Julian Assangesallegation that Indians now have more black money in Swiss banks than citizens of any othernation is hardly surprising in this context.


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On a parting note, what are essential for India areeconomic reforms with a social face. Theeconomic policies and their subsequent reformsmust be accompanied by suitable clauses tobenefit the economically weaker sections.Various schemes must be thoroughly scrutinizedand efforts must be made to see that the rewards

must reach everyone. Then India will not only beeconomically prosperous, but will also forgeahead towards its goal of world dominance.

20 Years of India

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