It has been over twenty years since the unlikely combination of P.V. Narasimha Rao as Prime Minister and his Oxford-educated finance minister finally liberated (so they claim) the Indian economy from overwhelming government control.
It was a rotting edifice based on institutionalized scarcity, wildly illogical price controls, hilariously shoddy products, protectionism and endemic underperformance was swiftly demolished in 100 days of inspired action. The Socialist Utopia powered by the fevered imaginations of Nehru and Mahalanobis which seemed forever doomed to rot at the so called ‘Hindu Rate of Growth’ was now dead and buried, just like them.
In the iconic Union Budget of 1991, Singh tabled the New Economic Policy or NEP, which overturned decades upon decades of inefficient policies. Some features of this policy included abolition of industrial licensing, de-reservation of industries for the public sector, removal of the threshold limit on assets, and most interestingly, automatic approval for foreign investment up to 51% in specified, high priority industries. Stabilization was also a priority, with the new measures like abolishing the export subsidies and restructuring the fertilizer subsidies reducing the crippling fiscal deficit from 8.4% in 1991 to a slightly more manageable 5.7% in 1993.
What were the effects of these reforms on daily life? Indeed, they were manifold. Average real incomes have quadrupled (Rajadhyaksha, Open Sesame, 2011), with the concomitant rise in standards of living. Consumer spending came into its own and it became easier for individuals to borrow from banks. Banks, in turn began to offer better interest rates and schemes for car, house and personal loans.
As a result, ownership of consumer goods has spread. Most homes are now beginning to have access to electricity. School attendance rates have soared (Rajadhyaksha, 2011), a sign of new aspirations. India is said to have accounted for 25 % of the world’s out-of-school population in 2001; this is now down to less than 10%, which is more directly proportionate to its share in the world population. One very important facet of this change is that a large number of Indians are eating better than they used to, with the consumption of fresh produce such as vegetables, eggs and fruit becoming more common.
Detractors continue to point out India’s appalling record on social indicators such as malnutrition or underweight children, but it can be argued that the direction of change is encouraging. Malnutrition, for example, continues to be too high for comfort. In fact, the prevalence of underweight children in India is among the highest in the world and is nearly double that of Sub Saharan Africa. (World Bank Report, 2005) The associated impairments and illnesses caused by this malnutrition shaves off 2-3% of GDP per annum.
Data from the United Nations Development Programme (UNDP) shows that ‘development’ (meaning, in this case, a sustained positive trend in...