Economic liberalization in India
Encyclopedia
The economic liberalization in India refers to ongoing economic reforms
in India
that started on 24 July 1991. After Independence in 1947, India adhered to socialist policies. In the 1980s, Prime Minister P. V. Narasimha Rao initiated some reforms. In 1991, after India faced a balance of payments
crisis, it had to pledge 67 tons of gold to Union Bank of Switzerland
and Bank of England
as part of a bailout deal with the International Monetary Fund
(IMF). In addition, IMF required India to undertake a series of structural economic reforms . As a result of this requirement, the government of P. V. Narasimha Rao
and his finance minister Manmohan Singh
(the present Prime Minister of India
) started breakthrough reforms, although they did not implement many of the reforms IMF wanted. The new neo-liberal
policies included opening for international trade and investment, deregulation
, initiation of privatization
, tax reforms, and inflation-controlling measures. The overall direction of liberalisation has since remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies
. The main objective of the government was to transform the economic system
from socialism
to capitalism so as to achieve high economic growth and industrialize the nation for the well-being of Indian citizens. Today India is mainly characterized as a market economy
.
As of 2009, about 300 million people—equivalent to the entire population of the United States—have escaped extreme poverty
. The fruits of liberalisation reached their peak in 2007, when India recorded its highest GDP growth rate of 9%. With this, India became the second fastest growing major economy in the world, next only to China. An Organisation for Economic Co-operation and Development
(OECD) report states that the average growth rate 7.5% will double the average income in a decade, and more reforms would speed up the pace.
Indian government coalitions have been advised to continue liberalisation. India grows at slower pace than China
, which has been liberalising its economy
since 1978. McKinsey states that removing main obstacles "would free India’s economy to grow as fast as China’s, at 10 percent a year".
For 2010, India was ranked 124th among 179 countries in Index of Economic Freedom
World Rankings, which is an improvement from the preceding year.
after independence
was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution
, industrialization under state monitoring, state intervention at the micro level in all businesses especially in labour and financial markets, a large public sector, business regulation, and central planning. Five-Year Plans of India
resembled central planning in the Soviet Union
. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s. Elaborate licences, regulations and the accompanying red tape
, commonly referred to as Licence Raj
, were required to set up business in India
between 1947 and 1990.
In the 80s, the government led by P. V. Narasimha Rao started light reforms. The government slightly reduced Licence Raj and also promoted the growth of the telecommunications and software industries.
The Vishwanath Pratap Singh (1989–1990) and Chandra Shekhar Singh government (1990–1991) did not add any significant reforms.
in 1984, and later of her son Rajiv Gandhi
in 1991, crushed international investor confidence on the economy that was eventually pushed to the brink by the early 1990s.
As of 1991, India still had a fixed exchange rate
system, where the rupee was pegged to the value of a basket of currencies of major trading partners. India started having balance of payments
problems since 1985, and by the end of 1990, it was in a serious economic crisis. The government was close to default, its central bank had refused new credit and foreign exchange reserves
had reduced to the point that India could barely finance three weeks’ worth of imports. Most of the economic reforms were forced upon India as a part of the IMF bailout.
The impact of these reforms may be gauged from the fact that total foreign investment (including foreign direct investment
, portfolio investment
, and investment raised on international capital markets
) in India grew from a minuscule US$132 million in 1991–92 to $5.3 billion in 1995–96.
Cities like NOIDA
, Gurgaon
, Gaziabad, Bangalore
, Hyderabad, Pune
, Chennai
, Jaipur
, Indore
and Ahmedabad
have risen in prominence and economic importance, become centres of rising industries and destination for foreign investment and firms.
Election of AB Vajpayee as Prime Minister of India in 1998 and his agenda was a welcome change. His prescription to speed up economic progress included solution of all outstanding problems with the West (Cold War related) and then opening gates for FDI investment. In three years, the West was developing a bit of a fascination to India’s brainpower, powered by IT and BPO. By 2004, the West would consider investment in India, should the conditions permit. By the end of Vajpayee’s term as Prime Minister, a framework for the foreign investment had been established. The new incoming government of Professor Manmohan Singh in 2004 is further strengthening the required infrastructure to welcome the FDI.
Today, fascination with India is translating into active consideration of India as a destination for FDI. The A T Kearney study is putting India second most likely destination for FDI in 2005 behind China. It has displaced US to the third position. This is a great leap forward. India was at the 15th position, only a few years back. To quote the A T Kearney Study “India's strong performance among manufacturing and telecom & utility firms was driven largely by their desire to make productivity-enhancing investments in IT, business process outsourcing, research and development, and knowledge management activities”.
OECD summarized the key reforms that are needed:
Microeconomic reform
The term microeconomic reform refers to policies directed to achieve improvements in economic efficiency, either by eliminating or reducing distortions in individual sectors of the economy or by reforming economy-wide policies such as tax policy and competition policy with an emphasis on economic...
in India
Economy of India
The Economy of India is the ninth largest in the world by nominal GDP and the fourth largest by purchasing power parity . The country is a part of the G-20 major economies and the BRICS, in addition to being partners of the ASEAN. India has a per capita GDP of $3,608 as per 2010 figures, making it...
that started on 24 July 1991. After Independence in 1947, India adhered to socialist policies. In the 1980s, Prime Minister P. V. Narasimha Rao initiated some reforms. In 1991, after India faced a balance of payments
Balance of payments
Balance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world.These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers...
crisis, it had to pledge 67 tons of gold to Union Bank of Switzerland
Union Bank of Switzerland
Union Bank of Switzerland was a large integrated financial services company located in Switzerland. The bank, which at the time was the second largest bank in Switzerland, merged with Swiss Bank Corporation in 1998, to become UBS to form what was then the largest bank in Europe and the second...
and Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
as part of a bailout deal with the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF). In addition, IMF required India to undertake a series of structural economic reforms . As a result of this requirement, the government of P. V. Narasimha Rao
P. V. Narasimha Rao
Pamulaparti Venkata "Narasimha Rao" was the ninth Prime Minister of India . He led an important administration, overseeing a major economic transformation and several home incidents affecting national security of India. Rao accelerated the dismantling of the Licence Raj. He is often referred to as...
and his finance minister Manmohan Singh
Manmohan Singh
Manmohan Singh is the 13th and current Prime Minister of India. He is the only Prime Minister since Jawaharlal Nehru to return to power after completing a full five-year term. A Sikh, he is the first non-Hindu to occupy the office. Singh is also the 7th Prime Minister belonging to the Indian...
(the present Prime Minister of India
Prime Minister of India
The Prime Minister of India , as addressed to in the Constitution of India — Prime Minister for the Union, is the chief of government, head of the Council of Ministers and the leader of the majority party in parliament...
) started breakthrough reforms, although they did not implement many of the reforms IMF wanted. The new neo-liberal
Neoliberalism
Neoliberalism is a market-driven approach to economic and social policy based on neoclassical theories of economics that emphasizes the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the...
policies included opening for international trade and investment, deregulation
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
, initiation of privatization
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
, tax reforms, and inflation-controlling measures. The overall direction of liberalisation has since remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies
Subsidies in India
According to Bhavik BaldhaThe Indian government subsidizes many industries and products, from gasoline to food. Loss-making state-owned enterprises are supported by the government. Water is free and paid by the state. Farmers are given electricity for free. Overall, a 2005 article by International...
. The main objective of the government was to transform the economic system
Economic system
An economic system is the combination of the various agencies, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed...
from socialism
Socialist economics
Socialist economics are the economic theories and practices of hypothetical and existing socialist economic systems.A socialist economy is based on public ownership or independent cooperative ownership of the means of production, wherein production is carried out to directly produce use-value,...
to capitalism so as to achieve high economic growth and industrialize the nation for the well-being of Indian citizens. Today India is mainly characterized as a market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
.
As of 2009, about 300 million people—equivalent to the entire population of the United States—have escaped extreme poverty
Poverty in India
Poverty is widespread in India, with the nation estimated to have a third of the world's poor. According to a 2005 World Bank estimate, 41.6% of the total Indian population falls below the international poverty line of 1.25 a day...
. The fruits of liberalisation reached their peak in 2007, when India recorded its highest GDP growth rate of 9%. With this, India became the second fastest growing major economy in the world, next only to China. An Organisation for Economic Co-operation and Development
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
(OECD) report states that the average growth rate 7.5% will double the average income in a decade, and more reforms would speed up the pace.
Indian government coalitions have been advised to continue liberalisation. India grows at slower pace than China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
, which has been liberalising its economy
Chinese economic reform
The Chinese economic reform refers to the program of economic reforms called "Socialism with Chinese characteristics" in the People's Republic of China that were started in December 1978 by reformists within the Communist Party of China led by Deng Xiaoping.China had one of the world's largest...
since 1978. McKinsey states that removing main obstacles "would free India’s economy to grow as fast as China’s, at 10 percent a year".
For 2010, India was ranked 124th among 179 countries in Index of Economic Freedom
Index of Economic Freedom
The Index of Economic Freedom is a series of 10 economic measurements created by The Heritage Foundation and The Wall Street Journal. Its stated objective is to measure the degree of economic freedom in the world's nations....
World Rankings, which is an improvement from the preceding year.
Pre-liberalisation policies
Indian economic policyEconomic policy
Economic policy refers to the actions that governments take in the economic field. It covers the systems for setting interest rates and government budget as well as the labor market, national ownership, and many other areas of government interventions into the economy.Such policies are often...
after independence
Indian independence movement
The term Indian independence movement encompasses a wide area of political organisations, philosophies, and movements which had the common aim of ending first British East India Company rule, and then British imperial authority, in parts of South Asia...
was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution
Import substitution
Import substitution industrialization or "Import-substituting Industrialization" is a trade and economic policy that advocates replacing imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of...
, industrialization under state monitoring, state intervention at the micro level in all businesses especially in labour and financial markets, a large public sector, business regulation, and central planning. Five-Year Plans of India
Five-Year Plans of India
The economy of India is based in part on planning through its five-year plans, which are developed, executed and monitored by the Planning Commission. The tenth plan completed its term in March 2007 and the eleventh plan is currently underway...
resembled central planning in the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s. Elaborate licences, regulations and the accompanying red tape
Red tape
Red tape is excessive regulation or rigid conformity to formal rules that is considered redundant or bureaucratic and hinders or prevents action or decision-making...
, commonly referred to as Licence Raj
Licence Raj
Licence Raj, the Permit Raj, refers to the elaborate licenses, regulations and accompanying red tape that were required to set up and run businesses in India between 1947 and 1990....
, were required to set up business in India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
between 1947 and 1990.
In the 80s, the government led by P. V. Narasimha Rao started light reforms. The government slightly reduced Licence Raj and also promoted the growth of the telecommunications and software industries.
The Vishwanath Pratap Singh (1989–1990) and Chandra Shekhar Singh government (1990–1991) did not add any significant reforms.
Impact
- The low annual growth rate of the economy of IndiaEconomy of IndiaThe Economy of India is the ninth largest in the world by nominal GDP and the fourth largest by purchasing power parity . The country is a part of the G-20 major economies and the BRICS, in addition to being partners of the ASEAN. India has a per capita GDP of $3,608 as per 2010 figures, making it...
before 1980, which stagnated around 3.5% from 1950s to 1980s, while per capita income averaged 1.3%. At the same time, PakistanPakistanPakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
grew by 5%, IndonesiaIndonesiaIndonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
by 9%, ThailandThailandThailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
by 9%, South KoreaSouth KoreaThe Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
by 10% and in TaiwanTaiwanTaiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
by 12%. - Only four or five licences would be given for steel, electrical power and communications. License owners built up huge powerful empires.
- A huge public sectorPublic sectorThe public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...
emerged. State-owned enterprises made large losses. - Infrastructure investment was poor because of the public sector monopoly.
- Licence Raj established the "irresponsible, self-perpetuating bureaucracy that still exists throughout much of the country" and corruption flourished under this system.
Narasimha Rao government (1991–1996)
Crisis
The assassination of prime minister Indira GandhiIndira Gandhi
Indira Priyadarshini Gandhara was an Indian politician who served as the third Prime Minister of India for three consecutive terms and a fourth term . She was assassinated by Sikh extremists...
in 1984, and later of her son Rajiv Gandhi
Rajiv Gandhi
Rajiv Ratna Gandhi was the sixth Prime Minister of India . He took office after his mother's assassination on 31 October 1984; he himself was assassinated on 21 May 1991. He became the youngest Prime Minister of India when he took office at the age of 40.Rajiv Gandhi was the elder son of Indira...
in 1991, crushed international investor confidence on the economy that was eventually pushed to the brink by the early 1990s.
As of 1991, India still had a fixed exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
system, where the rupee was pegged to the value of a basket of currencies of major trading partners. India started having balance of payments
Balance of payments
Balance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world.These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers...
problems since 1985, and by the end of 1990, it was in a serious economic crisis. The government was close to default, its central bank had refused new credit and foreign exchange reserves
Foreign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...
had reduced to the point that India could barely finance three weeks’ worth of imports. Most of the economic reforms were forced upon India as a part of the IMF bailout.
Later reforms
- The Bharatiya Janata PartyBharatiya Janata PartyThe Bharatiya Janata Party ,; translation: Indian People's Party) is one of the two major political parties in India, the other being the Indian National Congress. Established in 1980, it is India's second largest political party in terms of representation in the parliament...
(BJP)-Atal Bihari VajpayeeAtal Bihari VajpayeeAtal Bihari Vajpayee is an Indian statesman who served as the tenth Prime Minister of India three times – first for a brief term of 13 days in 1996, and then for two terms from 1998 to 2004. After his first brief period as Prime Minister in 1996, Vajpayee headed a coalition government from...
administration surprised many by continuing reforms, when it was at the helm of affairs of India for five years. - The BJP-led National Democratic AllianceNational Democratic AllianceThe National Democratic Alliance is a name used by political parties of several countries:* National Democratic Alliance for Egypt* National Democratic Alliance * National Democratic Alliance * National Democratic Alliance...
Coalition began privatizing under-performing government owned business including hotels, VSNL, Maruti Suzuki, Airports and began reduction of taxes, a sound fiscal policyFiscal policyIn economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....
aimed at reducing deficits and debts and increased initiatives for public works. - The United FrontUnited Front (India)The United Front was a coalition government of 13 political parties formed in India after the 1996 general elections. The coalition formed two governments in India between 1996 and 1998. The government was headed by two Prime Ministers from Janata Dal - H. D. Deve Gowda, and I. K. Gujral...
government attempted a progressive budget that encouraged reforms, but the 1997 Asian financial crisis and political instability created economic stagnationEconomic stagnationEconomic stagnation or economic immobilism, often called simply stagnation or immobilism, is a prolonged period of slow economic growth , usually accompanied by high unemployment. Under some definitions, "slow" means significantly slower than potential growth as estimated by experts in macroeconomics...
. - Economic and technology-related sanctions have repeatedly not proved to be very effective in compelling nations to change their sovereign decisions made in enlightened self-interest. India faced severe sanctions after Pokhran-I (five nuclear tests on 11 and 13 May 1998 at the Pokhran range in Rajasthan Desert), and sanctions that were more comprehensive were imposed following Pokhran-II. There were dire predictions of the collapse of the economy, double-digit inflation etc.
- After five years, most of the sanctions have been lifted and the Indian economy is continuing to grow at an acceptably satisfactory rate. The growth rate for 2003–04 was 6.0%. Though India’s Gross National Income is only $477.4 billion by conventional calculations, it translates into $2,913 billion purchasing power parity (PPP), according to the latest world development indicators. In PPP terms, it is the world's fourth largest economy, behind only the US, China and Japan.
Impact of reforms
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
, portfolio investment
Portfolio investment
The purchase of stocks, bonds, and money market instruments by foreigners for the purpose of realizing a financial return, which does not result in foreign management, ownership, or legal control.Some examples of portfolio investment are:...
, and investment raised on international capital markets
International Capital Markets
International Capital Markets, commonly known as "ICM" or "IC Markets" is an Australian based investment company offering over-the-counter and exchange traded derivative products including direct market access Contracts-For-Difference , foreign exchange and global futures contracts to its retail...
) in India grew from a minuscule US$132 million in 1991–92 to $5.3 billion in 1995–96.
Cities like NOIDA
Noida
Noida , short for the New Okhla Industrial Development Area, is an area in India under the management of the New Okhla Industrial Development Authority . Noida came into administrative existence on 17 April 1976 and celebrates 17 April as "Noida Day". It was set up as part of an urbanization...
, Gurgaon
Gurgaon
Gurgaon is the second largest city in the Indian state of Haryana. Gurgaon is the industrial and financial center of Haryana. It is located 30 km south of national capital New Delhi, about 10 kilometers from Dwarka Sub City and 268 km south of Chandigarh, the state capital...
, Gaziabad, Bangalore
Bangalore
Bengaluru , formerly called Bengaluru is the capital of the Indian state of Karnataka. Bangalore is nicknamed the Garden City and was once called a pensioner's paradise. Located on the Deccan Plateau in the south-eastern part of Karnataka, Bangalore is India's third most populous city and...
, Hyderabad, Pune
Pune
Pune , is the eighth largest metropolis in India, the second largest in the state of Maharashtra after Mumbai, and the largest city in the Western Ghats. Once the centre of power of the Maratha Empire, it is situated 560 metres above sea level on the Deccan plateau at the confluence of the Mula ...
, Chennai
Chennai
Chennai , formerly known as Madras or Madarasapatinam , is the capital city of the Indian state of Tamil Nadu, located on the Coromandel Coast off the Bay of Bengal. Chennai is the fourth most populous metropolitan area and the sixth most populous city in India...
, Jaipur
Jaipur
Jaipur , also popularly known as the Pink City, is the capital and largest city of the Indian state of Rajasthan. Founded on 18 November 1727 by Maharaja Sawai Jai Singh II, the ruler of Amber, the city today has a population of more than 3.1 million....
, Indore
Indore
Indore is one of the major city in India, the largest city and commercial center of the state of Madhya Pradesh in central India. Indore is located 190 km west of the state capital Bhopal. According to the 2011 Indian census, Indore city has a population of 1,960,631...
and Ahmedabad
Ahmedabad
Ahmedabad also known as Karnavati is the largest city in Gujarat, India. It is the former capital of Gujarat and is also the judicial capital of Gujarat as the Gujarat High Court has its seat in Ahmedabad...
have risen in prominence and economic importance, become centres of rising industries and destination for foreign investment and firms.
Election of AB Vajpayee as Prime Minister of India in 1998 and his agenda was a welcome change. His prescription to speed up economic progress included solution of all outstanding problems with the West (Cold War related) and then opening gates for FDI investment. In three years, the West was developing a bit of a fascination to India’s brainpower, powered by IT and BPO. By 2004, the West would consider investment in India, should the conditions permit. By the end of Vajpayee’s term as Prime Minister, a framework for the foreign investment had been established. The new incoming government of Professor Manmohan Singh in 2004 is further strengthening the required infrastructure to welcome the FDI.
Today, fascination with India is translating into active consideration of India as a destination for FDI. The A T Kearney study is putting India second most likely destination for FDI in 2005 behind China. It has displaced US to the third position. This is a great leap forward. India was at the 15th position, only a few years back. To quote the A T Kearney Study “India's strong performance among manufacturing and telecom & utility firms was driven largely by their desire to make productivity-enhancing investments in IT, business process outsourcing, research and development, and knowledge management activities”.
Ongoing economic challenges
- Problems in the agricultural sectorAgriculture in IndiaAgriculture in India has a significant history. Today, India ranks second worldwide in farm output. Agriculture and allied sectors like forestry and logging accounted for 16.6% of the GDP in 2007, % of the total workforce and despite a steady decline of its share in the GDP, is still the largest...
. - Highly restrictive and complex labour lawsIndian labour lawIndian labour law refers to laws regulating employment in India. There are over fifty national laws and many more state-level laws.Traditionally Indian governments at federal and state level have sought to ensure a high degree of protection for workers. So for instance, a permanent worker can be...
. - Inadequate infrastructureInfrastructureInfrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
, which is often government monopolyGovernment monopolyIn economics, a government monopoly is a form of coercive monopoly in which a government agency or government corporation is the sole provider of a particular good or service and competition is prohibited by law...
. - Failing educationEducation in IndiaEducation in India is provided by the public sector as well as the private sector, with control and funding coming from three levels: federal, state, and local. Child education is compulsory. The Nalanda University was the oldest university-system of education in the world...
. - Inefficient public sectorGovernment of IndiaThe Government of India, officially known as the Union Government, and also known as the Central Government, was established by the Constitution of India, and is the governing authority of the union of 28 states and seven union territories, collectively called the Republic of India...
. - Inflation in basic consumable goodsInflationIn economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
. - CorruptionCorruption in IndiaPolitical, bureaucratic, corporate and individual corruption in India are major concerns. A 2005 study conducted by Transparency International in India found that more than 55% of Indians had first-hand experience of paying bribes or influence peddling to get jobs done in public offices...
- High fiscal deficit
OECD summarized the key reforms that are needed:
Reforms at the state level
The Economic Survey of India 2007 by OECD concluded:See also
- Economy of IndiaEconomy of IndiaThe Economy of India is the ninth largest in the world by nominal GDP and the fourth largest by purchasing power parity . The country is a part of the G-20 major economies and the BRICS, in addition to being partners of the ASEAN. India has a per capita GDP of $3,608 as per 2010 figures, making it...
- Globalisation in India
- License Raj
- Hindu rate of growthHindu rate of growthThe Hindu rate of growth is a controversial and derogatory expression used to refer to the low annual growth rate of the socialist economy of India before 1991, which stagnated around 3.5% from 1950s to 1980s, while per capita income growth averaged 1.3%....
External links
- For a short educational video of the "economic history of India".