Why indias manufacturing sector has been stagnant?
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This month marks the 25th anniversary of India’s “big bang” economic reforms. This newspaper and many others have recounted the turbulent times preceding July 1991. The backdrop was a succession of unstable governments with a rapidly deteriorating macroeconomy and the commencement of the first Gulf war leading to a spurt in oil prices. There was great drama too, with secret airlifting of India’s sovereign gold to pledge as collateral for an emergency foreign loan.
Even though 1991 is the marker, it is fair to say that reformist thinking was evident even in the mid-1980s. For instance, there were trade reforms (easing of capital goods imports), financial sector reforms (abolition of control of capital issues) and several other smaller reform measures in the administration and running of the public sector. This prior incremental journey has been forgotten because it was overtaken by the tumultuous events of 1990 and 1991.
It is also clear by now that support for the reforms process was sprinkled across different ministries. Some well-known bureaucrats (now acclaimed as the architects of India’s reforms) occupied key positions in the economic ministries and the Prime Minister’s Office and saw eye-to-eye on what was needed to be done. Their synergy and collective intellect provided the force for the reforms roll-out. The political cover ultimately came from prime minister Narasimha Rao, whose leadership was crucial for the success of the reforms. Rao managed to obtain key cabinet decisions and consensus without the advantage of a mechanism like the group of ministers, used extensively by his successors.
Even though 1991 is the marker, it is fair to say that reformist thinking was evident even in the mid-1980s. For instance, there were trade reforms (easing of capital goods imports), financial sector reforms (abolition of control of capital issues) and several other smaller reform measures in the administration and running of the public sector. This prior incremental journey has been forgotten because it was overtaken by the tumultuous events of 1990 and 1991.
It is also clear by now that support for the reforms process was sprinkled across different ministries. Some well-known bureaucrats (now acclaimed as the architects of India’s reforms) occupied key positions in the economic ministries and the Prime Minister’s Office and saw eye-to-eye on what was needed to be done. Their synergy and collective intellect provided the force for the reforms roll-out. The political cover ultimately came from prime minister Narasimha Rao, whose leadership was crucial for the success of the reforms. Rao managed to obtain key cabinet decisions and consensus without the advantage of a mechanism like the group of ministers, used extensively by his successors.
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