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View: 1991 reforms gave us miracle growth, but now it’s fading

When Manmohan singh started economic liberalization in 1991, India is the world’s largest aid applicant. Today, India is a net aid donor, having committed $30.6 billion to its Asian and African neighbors.

In 1991, India’s per capita income of just $360 a year was surpassed by some of Asia’s “miracle economies” with growth rates of 7% per year or more. Three decades later, before Covid hit. India’s per capita income is up to $2,100. GDP has grown at 7% for two decades, making India a miracle economy as well.

Back then, the green revolution made India self-sufficient during normal monsoons but still dependent on food aid during droughts. Today, India is a net exporter of food even during drought, and the largest rice exporter in the world.

In 1991, India was the leader of the G-77 (a group of poor countries that repeatedly demanded more concessions for development). Today, India is in the T-20, the top 20 leading economies in the world. As a result, the United States now backs it for permanent membership of the United Nations Security Council.

Controversies over the data have confounded estimates of poverty reduction. NS World Poverty Clock, a consulting organization based in Vienna, estimates that in 2018 India’s poverty rate was only 5.3%. NS UNDP It is estimated that 271 million Indians were lifted out of extreme poverty between 2005-06 and 2015-16. Other estimates are much lower, but without a doubt hundreds of millions of people were lifted out of poverty before Covid hit.

A million statistics cannot convey the qualitative transformation of life from the licensing period of the Nehru-Indira era. Central planning then claimed that India was at its best when the people had no power to decide what to produce, consume or import – that was arguably best left to the socialist rulers. benevolent people who know what is good for the people more than they understand themselves. You cannot produce or import anything without a license. Productivity enhancement is not rewarded but punished by imprisonment for exceeding licensed capacity.

This made most things scarce in a way that today Indians under 45 would rarely believe. In the 1970s, people had to queue for seven years for a car and nine years for a scooter. HMT is owned by the government with a monopoly on making watches and buying a watch is difficult so it is often part of the bride’s dowry. I had to pull the strings to get Amul milk powder for my first baby. Cement is so scarce that you have to wait in line to get batches of cement that might be enough to build a house – if the first batch isn’t so bad. All for the public good, you understand.

The raj license meant that until 1980, India grew annually at 3.5%, half the rate of the outward-facing Asian tiger economies. India deeply pity tigers (like Singapore) because they are puppets of the West. Alas, the puppets are getting richer than their colonial masters, while India remains poor.

Today, socialists still lament 30 years of reform saying they ignore inequality. They forget that Indira Gandhi in the 1970s imposed an income tax of 97.7%, plus a wealth tax of 3.5%. A Treasury Department spokesman said at a post-budget news conference that if a wealthy person invests his or her entire fortune in a National Savings Certificate with an interest rate of 7 percent, the maximum amount that he can earn after tax of Rs 25,000. In theory, a socialist paradise has arrived. In fact, black money exploded, corporate honesty collapsed, crooks skyrocketed, and honesty went bust. In the three decades after independence, India’s poverty rate fluctuated with monsoons but there was no improvement. Meanwhile the population doubled. So the number of people in absolute poverty has doubled, a startling consequence of Indira’s attack on dismantling inequality. Alas, many leftists want to reinvigorate that approach.

Scary reforms began in the 1980s but became official policy in 1991. Some say liberalization has gone too far. No, it’s only half-baked, maybe a quarter-baked. NS Heritage InstituteIndia’s Index of Economic Freedom ranks India only 121st in the world, in the “virtually free” category.

Half-way through liberalization, however, was enough to produce a “miracle growth” of 7 percent over nearly two decades. But since 2016-17, growth has decelerated from 8.3% to 7%, 6.1%. 4.2% and negative 7.3% in Covid 2020-21. India looks better after 25 years of reform than after 30.

Apart from incomplete economic reform, the biggest hurdles are the bad police-judicial system that fails to deliver real justice, prevents contract enforcement (at the heart of the market system), and allows utter abuse for political vendors. Second, apart from some centers of excellence like IITs, the education system produces semi-illiterate students and unemployed university graduates, so underneath a thin layer of class skills world, India is empty. Third, entering a liberalized business but not exiting, examines the creative destruction necessary for success. If these are not addressed, India will not be able to regain its miraculous 7% growth.

https://economictimes.indiatimes.com/news/economy/policy/view-1991-reforms-gave-us-miracle-growth-but-now-its-fading/articleshow/84723737.cms | View: 1991 reforms gave us miracle growth, but now it’s fading

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