After twenty years of reform, areas that still need attention are nfrastructure, labour reforms, land acquisition, environment clearances, an integrated domestic market and a second green revolution.
We are presently celebrating 20 years of economic reforms. It is time for us to review how far we have progressed and the way forward. After two decades of gradual but slow economic reforms, the Indian economy has come a long way, and is now destined to be the world’s third largest economy in the next two decades. From a state of prolonged slow rate of growth we have achieved a steady state of sustainable high growth; from a low-income economy to a fast- moving emerging market economy.
To begin with, “reforms” started unshackling the Indian economy from excessive controls — the ‘licensing raj’. This was followed by gradual introduction of liberal policies towards integrating our economy with the global economy. At this stage, we can rightfully claim satisfaction for our achievements, but should accept the fact that a lot still needs to be done in taking India to the forefront. During these 20 years China has progressed much more rapidly and today it is considered to be the potential No. 1 world economy. (In 1990 both China and India had a per capita income of $350 approximately, whereas in 2009 China’s per capita income was $3,650 and that of India $1,220.)
When I reflect back, I cannot but draw satisfaction from the fact that soon after the reforms were introduced, a number of top Indian industrialists got together in 1993 to apply their minds to think of steps that were still necessary to bring more meaning to the reform process, and to accelerate its pace. They whole-heartedly “welcomed” the initiative taken and stressed that this was necessary to “secure faster growth which alone will generate employment, increase exports and give substance to social objectives” as well as “integrate the Indian economy with the global”.
After detailed deliberations a note was prepared, which was presented to the then finance minister, Dr Manmohan Singh. The industrialists who met him in New Delhi on November 10, 1993, consisted of Bharat Ram, L M Thapar, M V Arunachalam, Rahul Bajaj, B K Modi, C K Birla, Jamshed Godrej and the present writer. This note was released to the Press immediately thereafter.
This informal group emphasised, “The aim of Indian industry is to be as competitive as any of its peers in the world. Its vision is that it becomes multinational, in fact a world player.” It stressed that “the range of economic reforms must be widened and its pace accelerated”. In fact, it supported “the decision to reduce customs duty”. The note, while welcoming competition in the domestic market and liberalisation of foreign direct investment, urged the government to strengthen Indian enterprises “to enable them to play their rightful role in the industrial development of the country”.
The note also mentioned that “Indian industry needs a conducive environment that allows it to raise resources competitively, and which addresses itself to the issue of stake-holding, so that there is an additional incentive for growth and capital formation”. Most of the suggestions were accepted and implemented, albeit slowly. Had it been done more promptly and boldly, our economy would have been in a much better position by now.
Unfortunately “scepticism” is one of our national weaknesses, and these industrialists were instantly labelled backward looking, resisting reforms and protectionists. Presumably, this was because the critics could not fully foresee the realities of the world economy and its potential growth. Since we met in Bombay for the first time, it was christened the ‘Bombay Club’ by the press.
Indian entrepreneurs have been working relentlessly over the years against all odds — pre-independence, immediately after independence and post-reform — towards achieving the aim of making the Indian economy stronger and ushering in a welfare society.
Going ahead, we have to take the reform process forward, faster and boldly. Some areas which still need urgent attention are:
- Rapid improvement in infrastructure — economic and social. Inadequate economic or physical infrastructure such as power, ports, roads, railways, urban development and housing is impeding industrial development and competitiveness. Availability of required energy and coal need special attention. For India to take advantage of its young population, we need to accelerate social infrastructure such as education, healthcare and skill development. All these would require greater public-private partnerships;
- Labour reforms — for achieving higher productivity, commensurate with the needs of adopting modern technology.
- Removing obstacles in the way of rapid growth — such as environment clearance, land acquisition, procedural delays, needs to be given top priority, so as to facilitate higher investments;
- Integrating a fragmented domestic market into a truly common Indian market. For instance, the Goods and Services Tax needs to be immediately implemented.
- A second green revolution has to be brought in on an urgent basis. This in turn requires comprehensive agriculture reforms covering the entire gamut of activities or the supply chain from "farm to fork". The government has to put in more resources in the agriculture sector but there is also an urgent need to involve the private sector on a larger scale through the PPP route. This could include, among other things, encouraging supporting activities like research and development for higher farm productivity, better seeds, warehousing, cold chain and retailing.
Our weakness remains in our democracy being dominated by coalition politics, resulting in avoidable delays. At times, this makes it difficult to take strong and right decisions. Yet we have to be clear that there is no better way than democracy. All that we need is to improve its working.
Corruption is yet another evil, which has come to the fore through recent agitations. I do hope that we can pursue the initiatives taken to minimise, if not fully eradicate, corruption. It is equally important that individuals and civil society become more aware of their responsibilities and duties, and act accordingly.
India has a bright future and we will have to have a vision as well as the resolve to move ahead in eradicating poverty and inequality in our society. “Inclusive growth” should be our prime aim. Both the words “growth” and “inclusiveness” have equal importance. I am confident we can do it!