|| INDIA’S ECONOMIC REFORMS: AN APPRAISAL
Montek S. Ahluwalia
26.8.99 India’s economic reforms began in 1991 when a newly elected Congress government, facing an exceptionally severe balance of payments crisis, embarked on a programme of short term stabilisation combined with a longer term programme of comprehensive structural reforms. Rethinking on economic policy had begun earlier in the mid-eighties by when the limitations of a development strategy based on import substitution, public sector dominance and pervasive government control over the private sector had become evident, but the policy response at the time was limited to liberalising particular aspects of the control system without changing the system itself in any fundamental way. The reforms initiated in 1991 were different precisely because they recognised the need for a system change, involving liberalisation of government controls, a larger role for the private sector and greater integration with the world economy. The broad outline of the reforms was not very different from the reforms undertaken by many developing countries in the 1980s. Where India’s reforms differed was the much more gradualist pace at which they were implemented. The compulsions of democratic politics in a pluralist society made it necessary to evolve a sufficient consensus across disparate (and often very vocal) interests before policy changes could be implemented and this meant that the pace of reforms was often frustratingly slow. Daniel Yergin (1997) captures the mood of frustration when he wonders whether the Hindu rate of growth has been replaced by the Hindu rate of change! Yet even a gradualist process can achieve significant results over time and India’s reforms have been underway now for seven years. . That a consensus of sorts has evolved is...