Economic Liberalisation In India
Abstract
The economic liberalisation in India refers to the opening of the country's economy to the world with the goal of making the economy more market and service-oriented and expanding the role of private and foreign investment.[1][2] Indian economic liberalisation was part of a general pattern of economic liberalisation occurring across the world in the late 20th century.[3] Although some attempts at liberalisation were made in 1966 and the early 1980s, a more thorough liberalisation was initiated in 1991. The reform was prompted by a balance of payments crisis that had led to a severe recession and also as per structural adjustment programs for taking loans from IMF and World Bank.[4][5]
Through reform, India overcame its worst economic crisis in the remarkably short period of two years.
Specific changes included reducing import tariffs, deregulating markets, and reducing taxes, which led to an increase in foreign investment and high economic growth in the 1990s and 2000s. From 1992 to 2005, foreign investment increased 316.9%, and India's gross domestic product (GDP) grew from $266 billion in 1991 to $2.3 trillion in 2018[6][7] According to one study, wages rose on the whole, as well as wages as the labor-to-capital relative share.[5]
As an effect of the liberalisation in 1991, Poverty reduced from 36 percent in 1993-94 to 26.1 percent in 1999-00.[8]
India also increasingly integrated its economy with the global economy. The ratio of total exports of goods and services to GDP in India approximately doubled from 7.3 percent in 1990 to 14 percent in 2000. This rise was less dramatic on the import side but was significant, from 9.9 percent in 1990 to 16.6 percent in 2000. Within 10 years, the ratio of total goods and services trade to GDP rose from 17.2 percent to 30.6 percent.[8]
References
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