With economic reforms in India exactly 20 years old, unleashed
with the famous budget speech of Prime Minister Manmohan Singh
July 24, 1991 when he was finance minister, hopes run high on a
re-awakening to push Version 2 of liberalisation.
In the past 20 years, economists maintain, India has, indeed
progressed. But challenges remain, especially in lifting the
teeming millions out of poverty, despite the slogans of "inclusive
growth" chanted by successive governments since the mid-1990s.
In fact, there is also a crisis of sorts, be it in the quality of
governance, what with a spate of alleged scams, the ugly face-offs
between the government and the opposition, which is holding back
key legislation, or the conduct of corporate sector.
"There is a slowdown in industrial growth and investment. Economic
reforms are needed to reverse the trend," said Rajiv Kumar,
secretary general of the Federation of Indian Chambers of Commerce
"Reforms in insurance, banking, pensions, taxation and land
acquisition - each of them are important and needed to be pushed.
I think that a push to reforms is the intention of the prime
minister," Kumar told IANS.
Statistics, in fact, present a mixed picture. After years of
robust expansion, factory output growth fell to a nine-month low
of 5.6 percent in May. Foreign direct investment inflows fell 25
percent to $19.42 billion in 2010-11 and inflation remains a
Key economic reforms also remain, notably a new direct tax code,
goods and services tax, banking, insurance and pension
regulations, a fresh industrial policy and fresh norms on farmland
acquisition -- indecisiveness on which have caused much unrest.
Yet, the country's savings and investment rates -- two key
indicators on the capacity to push for high growth -- are at an
enviable 34-35 percent and 36-37 percent of the gross domestic
product (GDP), respectively.
"Reforms have to be pushed to keep the growth momentum. There is
no alternative," said Chandrajit Banerjee, director general of the
Confederation of Indian Industry. "I am glad the government is
listening to us and has started the process. It is great."
Another positive indicator has been the findings of the National
Sample Survey of India which shows real incomes, both in the
hinterland and in urban areas, have grown and people below the
poverty line have fallen to around 32 percent.
This apart, economic growth has been hovering around 8 percent for
some years now, there are some 850 million mobile phones and even
the middle class today has started using air transport thanks to a
host of budget carriers.
Yet, tens of thousands of villages out of some 626,000 remain
without electricity, tap water and sanitation, while decent
healthcare services and even nominal social security remains out
of reach for the majority of India's 1.2 billion citizens.
Looking ahead, however, analysts see some hope.
A hint that the government intends to push reforms also came from
a decision taken by a group of bureaucrats, led by Cabinet
Secretary A.K. Seth last week, recommending up to 51 percent
foreign equity in multi-brand retain trade business.
"Business confidence was low. No major decisions were taken in the
past several months. This will send a positive signal to investors
in all segments," maintained D.S. Rawat, secretary general of the
Associated Chambers of Commerce and Industry (Assocham).
Analysts concede that since many of the items on the reforms
agenda require legislative sanction, it is equally important to
carry the opposition along. But that is something over which there
appears to be little progress.
Late last month, the prime minister even accused the opposition
Bharatiya Janata Party (BJP) of playing politics and blocking key
economic reforms, hoping key legislation in areas such as
insurance, pension and taxation would be passed soon.
"The consensus that emerged until a few months ago on the good and
services tax -- the BJP is clearly playing politics. They do not
want the government to pass this landmark legislation," he had
said during an interaction with a group of editors.
Analysts like Jay Shankar, chief economist with financial services
major Religare felt the focus of the government was on appeasing
all, like most democracies. "I do hope the government starts
looking beyond the political issues to focus on development."