INDIA 20 YEARS OF LIBERALISATION

Background as to wat led to the liberalisaton thingy Then vs now Aaj ke benefits-shining india Whining india

 The generation which is in colleges today or even that generation which is busy preparing for Online CAT, would be surprised to know that the World without mobile phones, Orkut, Facebook, Google and Internet in general existed and it was not too far. Just 20 years. There was a time when there was just one television channel, no concept of breaking news, download and upload were the words associated with luggage and buses. There used to be trunk calls and computers were kept only in offices. Outsourcing was unheard of, so was debit cards. The things that we take for granted today 100 plus channels, Digital Films, Laptops, Mobile Phones, Social Networking, supermarkets and shops overflowing with goods, Sensex getting covered on the front page of national newspapers all of them have been ushered in because of something happened in India in 1991 around 20 years before. It was no less than a revolution, if we define revolution as a sudden and irreversible change. It is called Liberalization.

LIBERALISATION

 India became independent in 1947 after almost 200 years of British rule. The founding fathers of the nation were keen to make India an example for the World and they were cautious that the fledgling republic should not slip into chaos and anarchy, which was caused due to the tragedy of partition. The British rule in India started with East India Company, which in the 18th century, was the largest multinational company in the World. As a result, India was wary of private, profit-seeking foreign corporations and also of the advanced technology that they had an access to. So, in order to protect its infant industry from the seasoned foreign competition, it closed its doors to the rest of the World. In the year 1947, India was poor, but still 10th most industrial nation in the World and the second largest economy in Asia, after Japan. However, most of its output was getting produced for its colonial master, the UK.

 The leadership had felt the need to develop rapidly and it was understood that giving emphasis on markets and private sector would be futile because they neither have the capital nor inclination to undertake huge investments in infrastructure as their sole aim was to earn profit. government had to undertake that responsibility.

 On the lines of USSR, 5 year plans were introduced and since the targets in these plans were impossible for the private sector, a huge government or Public Sector was developed. Initially, the aim of the Public Sector was to provide competition to the Private Sector, but gradually, the hold of Public Sector on the country started increasing. Lot of areas such as aviation and life insurance were reserved for only public sector. Besides this, the private sector was given the daunting task of getting various licenses and permits, to be issued by government bureaucrats and a license raj was developed. To say that it was corrupt is an understatement. It was sclerotic, self-perpetuating, rigid and biased towards the big industrial houses. As a result, whatever development happened in India was very much lopsided and uneven. Public Sector was also susceptible to political manipulations and business decisions were taken on the grounds of political compulsions rather than economic sense

 operational restrictions as well. Acts like Monopolies and Restrictive Trade Practices (MRTP) Act or Foreign Exchange Regulation Act (FERA) were created with the notion of clipping the wings of the private sector. Even though a firm had a capacity to produce more, it could not produce more than its quota. Even though a firm wanted to import machinery, it could not do it without having almost 80 different types of permits and licenses. The only one thing on which there was no government control was the population. From the decade of 1960s, the population of India had grown very fast causing population explosion.

 All these things collectively started gnawing on Indias future in a decisive manner from the late 70s. The OPEC oil shock increased the oil prices substantially, eroding Indias already weak foreign exchange reserves. As a result, in 1980s, the government had to allow more exports and remove restrictions on exports, as the foreign exchange was necessary to buy the imports. However, these reforms were cosmetic and did not really have any kind of far-reaching impact. Finally, in 1991, the water finally had flown over the dam. India was left with very meagre resources foreign exchange was only for one week of imports

 Output was low, industrial growth was low and for the first time in Indias economic history, it was staring at default on interest and eventual bankruptcy. Exports were too less than imports. So, there was not sufficient foreign exchange. So, India had to borrow. Population was high but the jobs were not getting created. Firms capacities were curbed by laws like MRTP, so there was no output and no employment.

 Demand was high due to population but supply wasnt, leading to inflation and black marketing. Due to this, the governments tax collection, for both direct and indirect taxes was low, casing deficit in the budget, which the government had to bridge by borrowing. Public Sector of India was inefficient as it was not exposed to competition. It was also corrupt. Private Sector was left too weak by the constant interference of the government.

the 1991 reforms entailed a comprehensive, economy-wide approach that focused on integrating India with global markets. Indeed, the 1991 reforms marked Indias neoliberal turn and followed, in design and intent, the IMF and World Banks standard prescriptions for structural adjustment (programs through which heavily indebted countries were forced to liberalize their economies in return for IMF and World Bank loans). Once initiated, the reforms quickly took on a life of their own. Despite multiple changes in government and a rather ponderous pace, they were carried forward, widened in scope, and institutionally entrenched. The result, though not as dramatic as neoliberal ideologues might have wanted, is a fundamental transformation of the Indian economy, and a total reversal of the long-cherished ideal that the state must serve as Indias engine of development.

 India opened up consumer goods sector, causing a lot of imported goods coming to India but not paid attention to infrastructure. So, today we have Mercedes S class and potholed roads side by side.

 Indias government successive governments, rather, regardless of the political parties they belonged to had neglected three key areas Agriculture, Education and Health. So, today, we have 9% growth but half of the population is illiterate, infant mortality is slightly better than Africa and agriculture is still subsistence level and dependent heavily on rains.

 most of the states today vie with one another to grab a project of any significance, be it chemical, auto or even IT. In doing so, the benefits they are offering, right from free land to tax sops are being given on a platter. But the benefits or savings that a company gains from this does not affect the lower strata of management, but remains in the hands of the top management, thus depriving the former of the economic benefits.

Stats
Gallup data from 2010 suggest that only 5 percent of educated Indian adults would like to leave India permanently if they could While no comparable study exists for 1991 (or before), anecdotal evidence suggests that far more Indians were prepared to bid farewell to their motherland some twenty years ago

New india
The economy has grown at a brisk pace, with annual GDP growth rates reaching 7 to 9 percent in the last decade India is now the worlds tenth largest economy, and when figures are adjusted for purchasing power parity, it is the fourth. It has become a global leader of sorts in sectors such as information technology (IT) and pharmaceuticals, which performed remarkably well even through the years of the global financial crisis of 200809.

 signs of prosperity are everywhere: in opulent shopping malls that specialize in luxury cars, in glamorous cocktails parties that are hungrily photographed by tabloids, and in the palatial homes of Indias fifty-five known dollar billionaires (an example of the latter is the twenty-seven-story, billion-dollar home of Reliance Industries chief Mukesh Ambani, the richest man in India).

 encouraging signs of meritocratic social mobility. It is now quite common to hear of rags to riches stories, such as that of IT guru and multi-billionaire N.R. Narayana Murthy, the cofounder and former chairman of Infosys Technologies. Murthy, whose father is described as a poor schoolteacher by admiring biographers, is said to have risen in life through good, honest, hard work and an entrepreneurial ability to seize the opportunities thrown up by liberalization. Unlike Dhirubhai Ambani and other robber barons of the past, it is said, Murthy didnt have to bend the rules to succeed. Murthys example is cherished by proponents of liberalization, as it suggests that a cleaner ascent to wealth is possible in the new India.

A Rising Tide Lifts All Boats

has their immense wealth trickled down to the poor? World Bank, an institution that has proved unwavering in its support for the 1991 reforms. It estimates that the proportion of people living below $1 per day (in 2005 purchasing power parity) steadily declined in India, from 42.1 percent in 1981 to 24.3 percent in 2005. In absolute numbers, this is impressivea few hundred million human beings have been lifted out of wretched poverty.

Indias record on poverty reduction seems even less praiseworthy. The governments self-assessments are cases in point. In 2009, the government-appointed Saxena Committee concluded that 50 percent of Indians are living in poverty.

National Commission for Enterprises in the Unorganized Sector (NCEUS), reported on many unpleasant facts about neoliberal reform, including that of jobless growth. The NCEUS found that new employment in the post-reform period had occurred mainly in the unorganized (informal) sector, which is notorious for its paltry wages and precarious work conditions. It revealed, furthermore, that workers in the informal economy make up almost 93 percent of Indias labor force, and of these, only 6 percent are protected by some (usually meager) form of social security.

 The NCEUSs most controversial finding, however, was that 77 percent of the countrys population lives on less than twenty rupees (about fifty cents) per day, and that a large proportion of the worst off are from historically marginalized communities, such as Muslims and Dalits (members of low-ranking castes previously known as untouchables)

Displacement and Dispossession

states expropriation of land and natural resources for export has caused social dislocations on an unprecedented scale. Thousands of peasants, fishermen, and indigenous peoples have had their lives and livelihoods disrupted or destroyed. Indeed, the Naxalite-Maoist insurgency in the countrys south has its roots in the eviction of indigenous communities from their land. special economic zones (SEZs), the tax-exempt industrial areas that are expected to boost Indias global exports. Their reports suggest that much of the land for the creation of SEZs has been acquired coercively, with state officials and private developers colluding to exploit legal loopholes and evade fair compensation, and summoning the police to back up their arm-twisting tactics. The result has been widespread rural distress.

urban poor have not fared much better, thanks to the relentless quest to create world-class and entrepreneurial cities. Municipal governments routinely raze slums, obliterating living quarters, community forums, and home-based enterprises. Also common are beautification drives, wherein beggars, street vendors, and homeless persons are cleared from public spaces like beaches, parks, and promenades, which are then spruced up and secured with cameras, guards, and gates for middle-class use. The 2010 Commonwealth Games, held in Delhi last October, were marked by many such operations to beautify the city, and at an outrageous price of $22.5 million, according to a report released by the Auditor General in early August. The displaced poor may have evaded starvation by clutching on to the lowest rungs of the new urban economy, but like their rural counterpartswho toil as farm hands on daily wagesthey have lost a considerable amount of autonomy and dignity, and are often reduced to working long hours under constant management surveillance, such as in the sweltering kitchens of fast-food chains, or in cramped sweatshops producing goods for the export market.

 UN study on sanitation revealed that more people in India have access to mobile phones (about half of Indias 1.2 billion-strong population) than to toilets (about one-third). governments National Family Health Survey indicated, moreover, that many of Indias health indicators are worse than those of Bangladesh (in maternal mortality and infant mortality) and even of Sub-Saharan Africa (in the percentage of underweight children).

 expenditure on education has remained stuck at around 2.6 percent of GDP, and on health at a little above 1 percent. Expenditure on defense, in contrast, has increased steadily, and is currently at 3 percent of GDP. governments consistently meager expenditure on the social sector has been counteracted, to some extent, by a wave of welfare programs and rights-based legislation. The most significant of these is the National Rural Employment Guarantee Act (NREGA), a job-guarantee scheme enacted by parliament in 2005 and extended to every district in the country in 2008. The program assures 100 days of employment to all rural households that apply. Another milestone is the passage of the Right to Free and Compulsory Education Act in 2009.

Big money, big corruption

The governments half-hearted effort to address the problem of corruption also suggests that it isnt serious enough about helping the poor. Twenty years of liberalization have not led to lean, effective, and transparent government in India. This is yet another neoliberal promise that stands betrayed.

 In 1986, Prime Minister Rajiv Gandhi stunned the country with his declaration that, due to corruption and mismanagement, only 15 percent of every rupee spent on poverty-alleviation programs in India actually reaches the poor. By all indications, not much has changed since then. According to a 2008 study by Transparency International, Indias poor have to pay some $200 million in bribes every year to avail themselves of the most basic services. This, along with other findings, has led Transparency International to consistently downgrade Indias ranking in its Corruption Perceptions Indexfrom seventy-second in 2009, to eighty-fifth in 2010, to eighty-seventh in 2011. (The index measures the perceived levels of public-sector corruption in 178 countries.)

What needs to be recognized, however, is that liberalization has made things worse, not better, by prying open a vast number of new avenues for making a quick buck. Most cases of flagrant corruption today are spawn of the liberalization process. The most notorious of these was the 2G spectrum scam, in which cellphone licenses were sold for a fraction of their value, resulting in the loss of a staggering $39 billion to the national exchequer. Over a dozen of Indias most powerful politicians, civil servants, and journalists were implicated in the imbroglio when it surfaced in November last year, merely weeks after a series of corruption scandals bubbled up around the 2010 Commonwealth Games. The Auditor Generals report on the games has confirmed fears that its organizers had committed nothing short of daylight robbery. The report revealed, among other things, that many lucrative contractsfrom buying toilets to building the athletes villagehad been awarded on the basis of single bids to favored vendors. Indeed, the Commonwealth Games were a testament to the scale of Indias corruption problem, and to the sort of big money thats up for grabs in the countrys new economy. These prestige gameswhich organizers claimed would affirm Indias world-class statuscost taxpayers $4.1 billion instead of the $270 million initially projected, mainly because the government gave a blank check to the organizing committee in its rush to meet deadlines and avert national embarrassment. Some $1.8 billion is said to have gone missing, and the head of the organizing committee has been in jail since April on corruption charges. WikiLeaks head Julian Assanges allegation that Indians now have more black money in Swiss banks than citizens of any other nation is hardly surprising in this context.

 On a parting note, what are essential for India are economic reforms with a social face. The economic policies and their subsequent reforms must be accompanied by suitable clauses to benefit the economically weaker sections. Various schemes must be thoroughly scrutinized and efforts must be made to see that the rewards must reach everyone. Then India will not only be economically prosperous, but will also forge ahead towards its goal of world dominance.