Q. Since 1991-92, India has undergone a lot of Economic reforms like Liberalisation, Privatisation and Globalisation of the Economy. While highlighting the positives and negatives of the above-mentioned reforms, highlight how the present challenges of the economy are different from 1991-92.
It‟s a long question and requires tackling various sub-parts.
Address them well to score good marks in the exam.
– Highlight positives of LPG reforms
– How the challenges are same
– How they are different
– Offer some way ahead.
If you wish you can add a line or two about 1991-92 reforms and about what does LPG reforms
Moving on, with the positives of the reforms:
Positives of LPG Reforms:
– Disinvestment of PSUs leading to reduced bureaucratic ineffectiveness & inefficiency
– Increased competition from private sector leading to better quality products at
– Increased FDI bringing better technology & infrastructure
– Overall growth-oriention of policy planning
– Service sector growing rapidly earning a lot of Forex
– Increased GDP leading to greater employment & higher education opportunities
– Greater integration of Indian trade with the world
– Creation of world-class companies
– Increasing income inequality & problem inequality
– Manufacturing & Agriculture proving to be laggards
– Jobless growth
– Withdrawal of government and market failure –Twin Failure
– Environmental Hazard/ unplanned urbanization
– WTO, IMF, global integration leading to loss of sovereignty
– Owing to increased business activity, greater opportunities of corruption, adding to cost
of doing business
– Low ranking in ease of doing business
– Lack of skilled and unskilled workforce
– Lack of a culture of innovation, R&D
– Continuous interference of government in PSUs & PSBs
– Low financial Inclusion
Now tackle the next sub-part
Yes, present challenges of the Economy are very different from 1991-92:
1. Challenge of High convergence of Indian economy with the global economy:
Leading to loss of economic sovereignty.
Eg: Fed‟s announcements to increase rates, brings volatility in Indian markets. WTO also.
2. Challenge of dealing with Twin Failure of State and Market:
Post 1991, the economy has witnessed gradual withdrawal of state from a lot of business
activities, in a hope that market will fill the space vacated by the state.
But the market because of lack of purchasing power of the clients (because of poverty) has not
delivered on the expected lines, lending to a unique challenge of twin-failure of both market
and state to deliver essential services to the citizens.
3. Challenge of failure of regulatory institutes:
It also points towards a unique challenge of failure of regulatory institutes to ensure equitable
Eg: Failure of DGCA to ensure simultaneous development of non-metro routes vis-a vis metro
Widespread persistence of Insider trading, trade manipulation, APMCs, hoarding, etc.
4. Challenge of preventing inequality and concentration of wealth:
Post the demise of erstwhile license raj, quota raj, permit raj a unique challenge of
concentration of wealth leading to ever widening economic inequality.
5. Increased international comparisons to improve standard of doing business, governance &
6. Challenge of protecting (not preserving) domestic businesses while treating international
businesses at par.
7. Challenge of India being excluded from regional trade blocs, which may lead to loss of trade.
8. Challenge of climate change.
9. Post 1991, high levels of informalization of labor.
10. Increased expectation from IT, ITES and Service sector in general.
Yet, there are a lot of challenges that are still the same:
1. Still high import dependency.
2. Still high levels of unemployment
3. Agrarian distress.
4. Cost of doing businesses still very high bureaucratic delays, clearance delays, etc.
5. Female workforce participation still very low.
6. Still inefficient PSUs exist like Air India.
7. Still low levels of industrialization.
1. Institutionalising the reforms so that they are not contingent upon any adverse situation but
are a part of continuous improvement process.
2. Empowering the citizenry so that they could demand better outcomes.
3. Investing in infrastructure so that development becomes an outcome of growth and
4. Investing in human resources (Skill. Education and Health)
5. Transparency in governance so that polices concerning natural resources do not lead to adverse social, environmental, economic, etc outcomes.