Rightly quoted, India then desperately needed money from international agencies as the economic cliffhanger the country was facing had left no options but to capitulate their stringent terms of lending giants . All they wanted was to cleanse the pigsties of profligate spending and bad fiscal decisions under soviet tailored mixed.economy.
1991 was an year of upheavals. The new Congress government was not just in a minority, but the nation's finances were in dire straight with forex reserves at barely a billion dollars, and economy tottering on the edge. The balance of payment crisis, with its resultant transfer of the nation's gold bullions abroad, spoke of troubles. The cries of Mandal and Masjid were raging on the streets.
Amid this darkness, the liberalization proved a runaway success. GDP rose from slightly less than Rs 6 lakh crore to around Rs 200 lakh crore. Foreign investment grew more than 300 per cent in just the first 15 years. Undoubtedly, liberalization pushed up the nation's wealth and standing in the world, as the educated urban-middle and lower-middle classes reaped its fruits handsomely over the last three decades or so. It changed lives, livelihoods, and lifestyles dramatically.
At the same time, the liberalization has led to a marked shift in production to countries which have significant comparative advantage. These developments have been the major determinants in the rapid industrialization and economic growth of Asia and the Pacific region.The fruits of liberalization have not been equitably distributed.
Worse, the growth did not spur the job market. Reserve Bank of India figures for the first decade of liberalization show that growth in non-farm jobs was just 3.05 per cent, while the growth the previous decade during the slow 'socialist' era was better, at 3.67 per cent. Subsequently, it got worse. In the 2010-2018 decade, the growth slowed down to a flat 2 per cent figure. And the coronavirus pandemic last year struck the devastation.
In the matter of human development, India's position was 114 among all world nations when liberalization was set in motion in 1991, according to the UN index but has only further fallen to 131 in 2020.
There is no denying that outbreak of pandemic has tested the economic liberalization . People have lost their jobs and their incomes have been drastically cut. Unemployment rates have increased across major economies pushing them to recession.
Many Indians who had clawed their way out of poverty face grim job prospects and carry heavy debt loads. The devastation has highlighted just how poor health care and infrastructure, were neglected badly in the boom of liberalization.
More than 200 million have gone back to earning less than minimum wage, or $5, a day, according to the Bangalore-based Azim Premji University calculations. The middle class, the engine of the consumer economy, shrank by 32 million in 2020, according to the Pew Research Institute. That means India will be regressing on vital fronts just as its global importance is growing.
So economists feel, the post pandemic world, needed a new disposition of economic liberalization. just like in 1991, the situation warrants liberalization 2.0. The advent of new technology has spawned opportunities, as well as challenges, equally. The pandemic has reshaped the trade engagement rules.
India's concern is to ensure that its economic reconfiguration is not just growth of wealth, but it will ensure that all citizens get equitable share in the spoils of progress. This is indeed an idea whose time has come.
(Chander Sharma )
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