“Indian economic environment has undergone dramatic changes with a shift in development strategy”- In the light of this statement evaluate the series of economic reforms introduced since 1991.

The strategy of reforms introduced in India in July 1991 presented a mixture of macroeconomic stabilization and structural adjustment. It was guided by short-term and long-term objectives. Stabilization was necessary in the short run to restore balance of payments equilibrium and to control inflation. At the same time changing the structure of institutions themselves through reforms was equally important from long term point of view.

The new government moved urgently to implement a programme of macroeconomic stabilization through fiscal correction. Besides this, structural reforms were initiated in the field of trade, industry and the public sector.

PM PV Narasimna Rao with Finance Minister Manmohan Singh and others

Objective of Reforms

As per the Discussion Paper on Economic Reforms brought out by the Ministry of Finance in July 1993, the objectives of the reforms were:

“…to bring about rapid and sustained improvement in the quality of the people of India. Central to this goal is the rapid growth in incomes and productive employment… The only durable solution to the curse of poverty is sustained growth of incomes and employment… Such growth requires investment: in farms, in roads, in irrigation, in industry, in power and, above all, in people. And this investment must be productive. Successful and sustained development depends on continuing increases in the productivity of our capital, our land and our labour.

Within a generation, the countries of East Asia have transformed themselves. China, Indonesia, Korea, Thailand and Malaysia today have living standards much above ours… What they have achieved, we must strive for.”

Major Steps in the 1991 Reforms

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