ECONOMY / 25 YEARS OF LIBERALISATION
Pradeep Baisakh looks at the effects of the economic reforms started 25 years ago.This piece came in India Together on September 17, 2016
With the budget presentation by the then Finance Minister Manmohan Singh in July 1991, India began its bonhomie with the model of liberalization, privatization and globalization, transforming itself from a closed interventionist economy.
India completed 25 years of liberalization in July 2016. Each successive government have taken ahead the process of economic reforms by reducing the role of state and giving more and more space to the Indian corporate and the multi-national companies to invest in industrial and service sectors.
What has changed in these 25 years
Percentage of persons below poverty line, which stood at 45.3 percent in 1993-94, has declined to 22 percent in 2011-12 as per the Planning Commission’s estimation. Critics may question the official definition of poverty figures, to which I quite agree; but the facts remains that money has flown to the hands of people and there has been visible expansion of opportunities in varied directions.
The children of middle class families are employed as software professionals in Bangalore or Hyderabad and Indian dominate the human resources in the Silicon Valley of United States. India could produce young and new generation entrepreneurs like the owners of Flipkart, the online shopping giant and Ola, an app based taxi service and Micromax, the mobile company.
Most of the macro economic indicators are strong. As the figures stand today, India is one of the fastest growing economy in the world with GDP growth of 8.3 percent from 2004-05 to 2013-14, 7.2 percent in 2014-15 and 7.6 percent in 2015-16 while from 1984-85 to 1994-95 it was 5.9 and earlier it has been lower.
BSE sensex breached the 30,000 mark on March 4, 2015. It stands at 28,078 now (August 6, 2016) in comparison to 714 in 1989 and 781 in 1990!
India received foreign investment of above $70 billion in 2014-15, which was abysmally low before the era of liberalization. The per-capita income has gone up by 13 times in 2016 from 1991. The GDP stands at $2073 billion in 2015, which is 4 times to the GDP in 1991. India is now the seventh largest economy of the world (in nominal GDP). You will get similar whopping figures of forex reserve and the export and import. All these figures show that India is now a clearly established economic power of the world.
With India emerging as the global economic power, the power dynamics has also undergone a change not only with the United States but also with many other nations. India’s claim for a permanent seat in UN is much stronger than ever before. India’s leadership in global trade and climate negotiations and in alternative blocs like BRICS is noteworthy. The pre-1991 India certainly did not enjoy this height in the power ladder.
Now we have more and more social schemes in forms of MGNREGA (Rural Employment Law), Right to Education law, National Health Mission and now the National Food Security Law. The government coffer has now enough resources to fund these schemes.
At what cost
However, it is necessary to analyse the cost at which we have achieved this growth.
There are several pockets of the country witnessing unrest among the local people, threatened by loss of land and livelihood due to industrialization. As many as 182 districts in 9 states (of total of 29 states) of the country are declared to have some activities of Maoist insurgency, of them in 82 districts the scenario is serious (Government data in 2011).
It’s in common knowledge that the Maoist cadres have grown in the most backward areas of the country. There has been visible subversion of democracy while it comes to taking away land by the government from the people against their wishes. The state has trained guns or used forces against its own people in Singur and Nadigram (West Bengal) and in Kalinga Nagar (Odisha) for Tatas and in Jagatsingpur (Odisha) for POSCO, the global steel giant-all to acquire land for them. Several people have been killed in such incidences.
The level of inequality has risen with wealth getting into fewer hands. Instead of trickle down, we have witnessed a trickle up phenomenon. The report by OXFAM, an International development organisation released in 2014 suggests that since 1995 the gap between the bottom 40 percent and the top 10 percent in India is increasing.
Lifestyle has undergone vast change in India during the phase of liberalisation. From a low-cost economy and a cautiously spending population, India has now become a consumerist and to some extent flamboyant economy, particularly for the elite and middle classes. This is gradually creating a class structure where the bottom 40 is fighting to meet daily needs, the top 10 percent lead a life of extravagance. Many may defend it as necessary driver for growth though!
Climate change is a global phenomenon. But we have clearly felt its impact in forms of flood in Mumbai in 2005, flood in Uttarakhand in 2013 and flood in Kashmir in 2014 and 2015. Country also has witnessed severe drought consecutively for three years now leaving the farm sector hi and dry.
Natural disasters are not new in India but the nature and fury of the aforesaid disasters clearly has established the linkage to the climate change. India now is the 4th largest emitter of greenhouse gases (GHGs) in absolute terms though in terms of per-capita emission it’s 10th.
In absolute terms China is the biggest emitter followed by US and European Union. India’s emission constitutes 6.96 percent of the total global emission (Source: World resources Institute 2015). The amount of emission of GHGs by India has almost been doubled from 1994 level to 2010 (data comparison of Ministry of Environment and Forest, Govt of India and World Resource Institute). This is result of pursuing aggressive industrialization and the consumerist life style.
The period of liberalization has witnessed gross negligence of farm sector, which grew at a very abysmal rate since 1991.
Agro sector has become unproductive forcing farmers to leave farming and many have committed suicide. The number stands at 0.27 million (2.7 lakhs) in a period from 1995 to 2014, which is unprecedented. No sane government can defend such mass scale suicide of people in a democratic country due to faulty policies and inability of government to protect its agro-sector, on which nearly 60 percent of population is dependent. The current situation also does not show any signs of revival of situation of farmers.
Therefore, the gain from liberalization has been accrued in terms catapulting India to a near super power. But we have lost by way of creating new class structure on basis of differential income, so also unsustainable use of natural resources. The exploitative development model should be re-looked at to make it sustainable; otherwise next generation will be left with no resources for survival.
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