Question

Effect of liberalization on indian employment

Answer 1

Table of Content

Growth rate

Industry

Agriculture

Services

Education Sector & Health Sector



We have seen landmark shift in Indian Economy since the adoption of new economic policy in 1991. This had far reaching impacts on all spheres of life in India. There can be no concrete conclusions about their impact on Indian people. This turns out to be more of an ideological debate like capitalism vs Socialism. But there is no doubt in the fact that those reforms were unavoidable and very compelling. There was in fact, similar wave all across the globe after disintegration of USSR and end of the Cold War. Many Post-colonial democratic regimes, which were earlier sheltered by USSR, lost their umbrella. They had no option, but to fall in line to new unipolar world order dictated by USA. Even China in late 1980’s adopted ‘Open Door Policy’ through which it liberalized its economy by shedding communist mentality completely. South East Asian economies also reformed their economy and started engaging more with global economy. These along with China, pursued export led growth whereas Indian economy still relies almost wholly on domestic consumption.

 



Note changing Sectoral composition of India economy since independence

Composition – Services – Steady significant Increase (was more marked after reforms), Industry – Less marked increase (stagnated after reforms) , Agriculture Significant Decline

Patterns in the above graph explain inequity of Indian growth story. As per principle of economics, when a particular sector performs disproportionately higher than average growth rate, economic wealth starts concentrating into that sector. In this case that sector is Service sector. Within this sector, highest growth is marked by sectors such as financial services, Real estate services etc. , which are least employment elastic. Consequently, Growth of past decade was limited to upscale areas of the countries as almost whole service industry, operates from these areas. Majority of India got spillover or trickle down growth from here. This accelerated migration to urban areas. This in turned created array of social problems associated with urbanization. It fundamentally changed pattern of Indian Society.

Now we have ultra-modern and ultra-primitive society coexisting and conflicting with each other. On one side Social institutions like Personal Law boards, Khaps & kangaroo courts etc. tries to uphold their control over their respective community members, on other hand there is western wave pulling out these very members.

Undoubtedly strongest revolution of new century has been one of Information Technology, which started in last years of past century. This revolution was different because it made globalization even more obvious and stark. It made possible transfer of real time human labor across nations, without transfer humans themselves. Further, it erased all boundaries which hinder free flow of information. This has benefited sharing, nurturing and development of knowledge in societies which earlier had access only to substandard or non-updated information. As always package is coupled with some grim realities too.

Governments all across the world has lost their capacity to regulate and ward of against malicious, false, sensitive information and content. Rise of Islamic State demonstrates that, IT revolution has helped development of global Terrorist links more than anything. Moreover, explicit content is freely available on web, to which unmatured children have unrestricted access

GDP growth rate – India’s annual average growth rate from 1990 – 2010 has been 6.6 % which is
almost double than pre reforms era. GDP growth rate surpassed 5% mark in early 1980’s. This made impact of 1990’s reforms on growth unclear. Some believe that 1980’s reforms were precursor to LPG reforms. Other things apart, it is clear that 1980 reforms led to crash of economy in 1991, which was remedied by LPG reforms which were quite more comprehensive. It was IMF loan which gave government to adjust its economy. It was largest ever loan given by IMF. Initially there were global doubts on India’s credibility for loan, but India has been so far a disciplined borrower.

Industrial Growth Rate – Barring few years industrial growth rate has been not much impressive. Share of Industry still remains stagnantly low at 25%. Worst is that India has transitioned to be a service led economy, directly from an agrarian one. One expiation of this is end of policy of imports substitution which derived industrial growth upto 1990. Foreign companies got free access to Indian markets and made domestic products uncompetitive. They obviously had better access to technology and larger economies of scale.