Economic Performance under First Generation Reform


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

The primary adjustments of the First Generation Economic Reform (1991 - 2000) has been successful by all standards

GDP growth rate - after an initial slowdown during 1992-94 (5%), growth picked up to over and above 7% during 1994-97. Subsequently, the growth declined to 6.3 per cent during 1997-2000.

At the end of January, 2000 the country’s total foreign exchange reserves amounted to US$ 34.90 billion, enough for 8 months of imports. Fears of default on balance of payments are no longer valid.
The rupee has been convertible on the current account and reforms for capital account are being undertaken almost every year.

The exchange rate has remained reasonably stable

 Other macro-variables also indicate that the short-run growth is appropriate. The debt-GDP ratio declined from 41 per cent (1991-92) to 23.5 per cent (1998-99), indicating that we are no longer on a path of debt accumulation.

The debt-service to current receipts ratio declined from 30 per cent (1991-92) to 18 per cent (1998-99), indicating that a larger share of current receipts is free for allocation in a more productive manner than on interest payments.

The short-run debt declined from 10.5 per cent of total debt (March 1991) to 4.7 per cent (September 1999).

Internal liabilities of the government that had burgeoned to 52 per cent of GDP (1990-91) has stabilized at about 46 per cent of GDP.

 Inflation rates in India are sensitive to agrarian production and since this has been reasonably stable
Industrial production has tended to vacillate, however, Index of Industrial production (IIP) registered a 6.1 per cent per annum growth rate over 1993-2000


Slump in exports which recorded a negative growth rate of 3.9 per cent in 1998-99
During 1993-99 investments in agriculture have been growing at 3.33per cent per annum.Close to 70per cent of this is from private sources

During 1992-97, software exports registered a 43 per cent growth and this rate of growth has continued

The main thrust of new economic policy is to bring down fiscal deficit to the extent of 3 percent of GDP. It has reduced but still Government  is far away from its target.

Foreign Direct Investment increased substantially. Proposals worth Rs. 12163 crore, and Rs. 20319 crore of foreign direct investment were sanctioned in the consecutive years of 1995-96 and 2000-01 respectively.

There has been a spectacular achievement in the sphere of poverty alleviation. The poverty ratio decreased from 36% in 1993 - 94 to 26.1% in 1999 – 2000 – a fall that was steeper than that in the 1970s or 1980s. 

The tax revenue of the central government registered a sharp increase of Rs.85293.2 crore during 2000-01 to 1990-91 whereas the corresponding figure during 1980-81 to 1990-91 was only Rs. 33620 crore.

Failures

(a) Slow Infrastructure development – Roads, power
(b) Failure in increasing labour intensive manufacturing
(c) Not taking advantage of demographic dividend
(d) Slow social sector development – Education, health
(e) Governance Failures
(f) Lack of labour reform
(g) The combined deficit at the center and states exceeds 10 percent of GDP. Given an already high debt-to-GDP ratio of nearly 60 percent, this deficit is unsustainable; it is also crowding out private investment.
(h) Fertilizer and food subsidies pose yet another challenge.
(i) Economic reforms have virtually bypassed agriculture.
(k) Financial sector reforms, particularly the reform of banking, remain a distant goal.



Wednesday, 26th Oct 2016, 01:18:40 PM

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