libralisation

In view of the payment crisis faced by the country, liberalization and economic reforms in 1991 could not bring complete salvation.

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The nation was experiencing a payment issue in 1991. The government at the time took numerous actions in the name of economic and liberal reforms. The reforms at the time were not very thorough if we look at them now. The domestic front didn’t receive any extra attention.

liberalization

If the economic reforms of 1991 were truly half-baked or not, the subject is being asked in light of recent comments made by Finance Minister

. We must examine the conditions and actions conducted at that time before drawing any conclusions in this regard. The macroeconomic stability and structural balance were primarily taken into consideration when the economic reform measures were implemented in 1991 due to the payment crisis the nation was experiencing. To make exports competitive, the rupee was devalued by around 20%. Additionally, measures were done to lower import taxes and stop providing cash compensation. Additionally, it received a mixture of international institutional investment and foreign direct investment. The foreign equity investment cap of 40% was eliminated.

The Reserve Bank was given direct authority to approve foreign equity investments up to 51% in around 30 industries. The biggest advance on the domestic front was, however, eliminating the licencing system. Economic reforms were not heavily concentrated on the domestic front, except for the elimination of the licencing system. In actuality, domestic economic reforms are trickier to implement. The central government can now make decisions pertaining to it at its level thanks to the reforms of 1991. Domestic reforms pose more difficulties and status-changing challenges. Because of this, few governments have the guts to support them.

No doubt, the Modi administration has that desire. On the internal front, numerous economic reforms have been implemented. Let’s examine the reforms of the era and some of the current government’s initiatives point by point. The 1991 economic changes only mentioned the topic of import duties. A GST-like system was put in place by the Modi administration. GST undoubtedly had its issues, but it also improved the system. India’s position in the World Bank’s Ease of Doing Business index increased from 142 in 2014 to 63 in 2020. Another such measure is the Insolvency and Bankruptcy Code (IBC).

It must be realised that liberalisation involves more than just making it easier for businesses to open; the process for doing so is as crucial. The IBC has made sure that actions are done to protect the interests of all creditors when moving a firm into liquidation or closure. Land reforms, labour reforms, and agricultural reforms were not addressed in the 1991 reforms. Agriculture and land fall under the state list, whereas labour is on the concurrent list. Currently, four labour regulations encompass roughly 40 labour legislation.

Some of the states on the Concurrent List have implemented labour reform, while others have not. In addition, the central government is moving forward with land reform, which is a state-related issue. Privatization was the main emphasis of the 1991 reforms. In order to let the private sector participate in distressed projects, the current administration has established a National Monetization Pipeline. During the four years from the fiscal years 2021–2022 to 2024–2025, projects worth six lakh crores are being planned for monetization.

liberalization

The government is important in monetizing rights, not ownership. In other words, the monetized assets will return to the government after the predetermined period. Regarding the current administration, the trinity of Jan Dhan, Aadhar, and Mobile has significantly strengthened the Direct Benefit Transfer system. This put a stop to the government plan leaks. There have also been introduced social reform programmes like the Jal Jeevan Mission, which aims to provide clean water to every home, and the Swachh Bharat Mission, which aims to provide toilets. Capital spending on road building grew, improving connectivity and lowering business logistics costs.

The railroads are also undergoing improvements. Enhancements have been made to rail, road, and aviation connectivity to the Northeast. It is obvious that the 1991 reforms were just half-hearted in actuality. The work started by the prior governments was continued by the succeeding governments. The Modi administration began working on such reforms at the same time that it started taking action.

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