Economic Progress
India is currently in the early stages of an economic and cultural revival and it is only by carefully examining India’s history over the last 100 years or so that one can appreciate the true potential of this country. India’s strengths are its ability to support the largest, vibrant democracy in the world with a population of 1.16 billion people, having a free press, strong financial and legal system and a growing largely English speaking young workforce with an ambitious and positive attitude for success on the global stage as manifested in the recent global acquisitions targeted by Indian corporations.
It is harrowing to realize that by self infliction, India had slow economic growth for decades after it won independence from the British in 1947. India had a state-controlled, state-directed, inward-oriented development strategy for nearly 30 years and that kept a lid on inflation but delivered slow growth. During Indira Gandhi’s tenure in the 1970s, India had a state of emergency which in effect led to a communist type of government acting under a socialist banner.
In the 1980s the process of reform started, but the 1980s were characterized by piecemeal reforms trying to remove what were deemed to be irksome aspects of some of the controls, rather than rethink the whole economic management arrangement. The government began to run a fiscal deficit by borrowing at home and abroad (external debt quadrupled in the 1980s) but this led to some economic growth.
The true economic revival began in India in 1991 after the Gulf War crisis which resulted in a spike in the oil price. It was the finance minister, Manmohan Singh (the current Indian Prime Minister) who is widely regarded as the architect of India's original economic reform programme. The economic liberalization package pushed through by Singh opened the nation to foreign direct investment. The reforms made were systematic and permanent and may have been prompted by two reasons. First, China had opened up its economy in 1978 and enjoyed rapid growth thereafter and India having lost a war against China in 1962, could not relish being left behind by their neighbour. Second, India's model for economic development was based on the Soviet Union which collapsed ignominiously in 1991, so systematic reforms had to take place. The reform agenda of the 1990s had poverty alleviation and employment growth, fiscal consolidation and tax reform, industrial and financial sector reform, foreign trade and investment liberalization, including market determination of interest rates, subject to the intervention by the Reserve Bank of India, and the reform of infrastructure.
Although India’s future sounds convincing it will need to address its two main challenges; systematic improvement in primary and secondary education and continued substantial investment in infrastructure in order to reach its ambition to become an economic powerhouse over the next few decades.
