“The economy is the start and end of everything. You can’t have a successful educational reform or any other reform if you don’t have a strong economy.”
—David Cameron
Money might not be everything, but it definitely is something. Karl Marx, in his theory of economic determinism, stated that the entire society rests on the base of its economy. This means that the political, social, legal, cultural, intellectual and all other issues rest on the economy of the country. In this regard, the economy needs to keep pace with the dynamic global order.
When India attained independence in 1947, we were recovering from two centuries of economic and social exploitation which had led to the drainage of wealth from our country to the colonial powers. As the control of India came to our hands, the economy saw a number of changes as the decades passed by. We can describe these changes as economic reforms of our country.
The founding forefathers of Independent India decided that India would take a socialist character, wherein the welfare of the poor majority would be on the forefront. The Planning Commission began formulating the strategy to pull India out of poverty and strive towards development. The Second Five-Year Plan, also known as the Mahalanobis Plan, was aimed at promoting ‘government-led industrialisation’. Hence, the control of majority of the economic sectors—agriculture, industry and the services—went majorly to the government. This led to the rise of public sector enterprises and their performance evaluation. Herein, we saw the emergence of navratnas, maharatnas and miniratnas in the country. Private sector was given market space too, but its scope was negligible in the wake of the licence raj, tariffs and quotas in place to protect the domestic producers. The economy was almost entirely controlled by the government.
As the government protected the local industries from international competition, this strategy backfired on the Indian economy. Indian producers became excessively secure and did nothing to improve the quality of their products. As a result, it was quite evident that Indian products and services could not stand anywhere in front of the global standards. India’s economy started falling by huge steps. By the 1990s, we did not have foreign reserves to last even for 15 days. The survival of the Indian population was in grave danger.
It was during this time that the Indian Government decided to seek help from the World Bank and International Monetary Fund, who asked India to open up its economy to global competition. Since the economic reforms of 1991, India has witnessed the advent of massive international competition along with single digit growth.
The most recent economic reform that India has witnessed is the implementation of the Goods and Services Tax from July 1, 2017. Due to this reform, the entire country has come under a single tax umbrella and the mechanism of tax collection has been simplified.
It is important to keep analysing the economic reforms for the development of a country. Economic reforms, however, must be undertaken keeping in view all the sections of the Indian population.
As of 2019, about two-thirds of the Indian population lives in rural areas. For rural people, economic reforms reach only in the form of government-led subsidies and welfare schemes. A landless farmer would not be interested in the growth rate of the country. He would rather be interested if the government launches schemes such as Pradhan Mantri Jan Dhan Yojana, wherein he can get direct money transfers in his bank account every month for his essential expenditure. He would be more aligned to support a government which would provide quality food grains at ration shops without having to stand in long queues. His life would be transformed if he would know that his out-of-pocket medical expenditures have been taken care of by the government through schemes like AYUSHMAN BHARAT.
Another section of the population is the organised service sector, which has a different set of aspirations. An average working person aims to have an improved quality of life and a sense of accomplishment after work. To achieve this, the country has to modernise itself and match up to the global standards of living. The Smart Cities Mission is one initiative which has the potential to improve the quality of living in India manifold.
Another section of the Indian population is the one that comprises intellectuals and people working to satisfy their higher order needs (According to Maslow’s need hierarchy theory, Higher Order needs are on the top of the hierarchy of human needs). This comprises the scientists, researchers, artists, engineers and so on. In order to make them more productive, the economic reforms have to focus on more expenditure on Research and Development. Opening more institutions of higher education can boost up the economy of the country by providing returns to Human Capital Formation.
India has been performing well in improving the Human Development Indicators after the Economic Reforms of 1991. We have successfully reduced infant mortality rate, while increasing the literacy rate to about 75%. The overall economic development of a country defines the domestic and economic performance of the country. The economy is an aspect which can never remain static—be it the foreign exchange rate or the forces of demand and supply in the open market. So, the policymakers have to be on their toes to keep the country in line with the international market in this age of a ‘global village’.